# AVM Glossary

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• The apparent displacement of position of a body with respect to a reference point or system of coordinates, caused by moving the point of observation.
• Numerical descriptive measure of the population, for example, the arithmetic mean or standard deviation. Parameters are generally unknown and estimated from statistics calculated from a sample of the population.
• A statistic whose interpretation or reliability depends on the distribution of the underlying data.
• A contiguous area of land described in a single legal description or as one of a number of lots on a plat; separately owned, either publicly or privately; and capable of being separately conveyed.
• A numeric or alphanumeric description of a parcel that identifies it uniquely. Assessors use various systems, many with common features. A growing number of these systems include geocoding. In the thirty states where it exists, the Public Land Survey System, authorized by the United States Government in 1785, is often a basis for parcel identification.
• An analysis of one unit of the economy in light of constraints imposed by economic forces outside the unit. An example would be a highest and best use analysis of vacant land where the land use is limited by zoning.
• An interest (in property) that is less complete than a fee simple interest.
• An AVM Performance Metric that measures a combination of accuracy and precision. The PPE is the percentage of properties for which the AVM predicts selling prices to within +/- a given percentage. The complement of the Failure Rate.
• The building block of all accuracy-related performance metrics. Analysts calculate percentage error in the following manner: Percentage Error = (AVM Value – Benchmark Value x 100%) / Benchmark Value
• The values that divide a set of data into specified percentages when the data are arrayed in ascending order. The tenth percentile includes the lowest 10 percent of the values, the twentieth percentile includes the lowest 20 percent of the values, and so forth.
• A cause of depreciation that is a loss in value due to ordinary wear and tear and the forces of nature.
• A software solution that automates an organization’s AVM selection rules and valuation acceptance criteria. This technology is particularly useful for implementing a cascade and ensuring enterprise-wide compliance with collateral valuation policies.
• A single numerical value that can be used to estimate a population parameter. It is calculated on the basis of information collected from a sample. Point estimates are generally constructed to provide the best unbiased estimate of the population parameter consistent with the sample data. However, the point estimate is only an estimate and is unlikely to have the same value as the population parameter. (See confidence interval and reliability for discussion of precision of the sampling process.)
• A line chart.
• Combining two or more strata to form one regression model.
• All the items of interest, for example, all the properties in a jurisdiction or neighborhood; all the observations in a data set from which a sample may be drawn.
• The hit rate for an AVM that is in a second or subsequent position within an AVM cascade expressed as the percentage of AVM valuations returned relative to the number of properties submitted to that AVM (i.e., those properties where the preceding AVM(s) did not return a usable value).
• See Price-related bias. Also see Price-related differential (PRD).
• See Price-related differential.
• The dispersion of a model’s valuation errors, with greater dispersion being considered less precise, and lower dispersion being considered more precise. Mean and median absolute error, standard deviation and forecast standard deviation are all measures of an AVM’s precision.
• The Predicted Residual Sum of Squares (PRESS) predicted value is the (regression) model’s predicted value of the ith observation in the training dataset, obtained by fitting the original regression model with the ith observation withheld.
• The sale price that results from adjustments made to the stated sale price to account for the effects of time, personal property, atypical financing, and the like.
• Price Dispersion refers to the situation in which two identical commodities sell for different prices at the same point in time and at the same location, a concept related to the law of one price and arbitrage pricing. In housing markets, for price dispersion to exist, the variance in house prices cannot be attributed completely to any remaining heterogeneity between two very similar house located very near each other. Any unexplainable price variation is then called price dispersion.
• A measure of AVM precision. The PRB is the slope in the regression of the AVM valuation-to-sales price ratios (adjusted by the median ratio) on a proxy variable that measure the value of the house. The proxy value variable is the natural log of the average of selling price and AVM valuation (all divided by 0.693). The PRB coefficient shows whether an AVM's valuation-to-sales price ratios are systemactially higher, lower or steady as values increase. A negative value indicates regressivity, while a positive value indicates progressivity.
• The PRD is mean (valuation-to-selling price) ratio divided by the weighted (by selling prices) mean ratio. The PRD assesses the level of uniformity in AVM valuation-to-sales price ratios between low and high values properties. The statistic has a slight bias upward. Price-related differentials above 1.03 tend to indicate assessment regressivity; Price-related differentials below 0.98 tend to indicate assessment progressivity. Used as a measure of AVM precision.
• (1) The actual amount of money exchanged for a unit of goods or services, whether or not established in a free and open market. An indicator of market value. (2) Loosely used synonymously with "offering" or "asked" price. Note: The sale price is the "selling price" to the vendor and the "cost price" to the vendee.
• The principle of change asserts that all markets are in a continual state of change. According to this principle, properties generally go through the three stages of integration (development), equilibrium (stasis), and disintegration (decline).
• The principle of conformity states that the value of a group of properties will rise to its highest possible level in an area where architectural styles are reasonably homogenous and surrounding land uses are compatible with the use of the specified properties.
• The principle of contribution requires an appraiser to measure the value of any improvement to a property by the amount it contributes to market value, not by its cost.

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/)