AVM Glossary

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  • International Association of Assessing Officers.
  • Anything done to raw land with the intention of increasing its value. A structure erected on the property constitutes one very common type of improvement, although other actions, such as those taken to improve drainage, are also improvements. Although such cases are rarely intentional, "improvements" can conceivably diminish the value of the land; note, however, that easements restricting the use and value of land are not considered improvements.
  • Buildings, other structures, and attachments or annexations to land that are intended to remain so attached or annexed, such as sidewalks, trees, drives, tunnels, drains, and sewers. Note: Sidewalks, curbing, sewers, and highways are sometimes referred to as "betterment," but the term "improvements" is preferred.
  • One of the three approaches to value, based on the concept that current value is the present worth of future benefits to be derived through income production by an asset over the remainder of its economic life. The income approach uses capitalization to convert the anticipated benefits of the ownership of property into an estimate of present value.
  • A part of depreciation for which it is not economical to correct the condition, and if corrected, the cost of correcting the condition exceeds the value added.
  • An estimate of value using a model different from that used for assessment purposes. Independent appraisals are used to supplement sales in sales ratio studies or in appraisal ratio studies.
  • Process/Model validation designed and executed by parties that are separate (independent) from those that parties that build, sell, resell or are using or running the system being validated. The validating parties may be internal to the organization (e.g. credit risk managers) or independent third-parties (e.g. consultants). Validation should include conceptual soundness as well as back-testing against out-of-sample benchmarks. It should be done by staff with appropriate qualifications and incentives.
  • A variable whose value is not determined by other (dependent) variables.
  • A Valuation Method that provides an estimate of value as a function of time. An index Method finds the house price path most consistent with observed appreciation/depreciation rates in a region. Typically referred to as an “index of home price appreciation,” indexes are mathematical algorithms that adjust home price values (up or down) for the passing of time.
  • See elasticity.
  • The branch of statistical studies concerned with making predictions about the values of a large number of observations of a variable on the basis of a small number of observations of that variable and related facts. (2) By extension, the statistics calculated in such predictions.
  • These products safeguard clients against losses incurred due to an inaccurate assessment of real estate collateral - for instance, if a loan goes into default or enters foreclosure. Vendors warrant the reliability of their valuations and work with top-rated insurers to offer coverage on a range of AVMs and derivative products.
  • One repetition or repeated cycle in a process of estimating values as close as possible to actual values by repeated approximations. The results of each approximation are used in the next one.

Sources:

a)       AVMetrics

b)      AVMs 201: A Practical Guide to the Implementation of Automated Valuation Models, Jim Kirchmeyer, 2008.

c)       IAAO 2015, Glossary for Property Appraisal and Assessment, 2015. (2013 online: https://www.iaao.org/media/Pubs/IAAO_GLOSSARY.pdf )

d)      Collateral Assessment & Technologies Committee, Summary of Definitions & Terms, 2006.

e)      Joint Industry Task Force on AVMs, IAAO Standard on AVM Glossary, September 2003. https://www.iaao.org/media/standards/AVM_STANDARD.pdf

f)        Appraisal Institute, Joint Industry Task Force on Automated Valuation Models, Work Group Terminology, 2005.

g) Merriam-Webster (https://www.merriam-webster.com/)