ADVISORY OPINIONS
This communication by the Appraisal Standards Board (ASB) does not establish new standards or interpret existing standards. Advisory Opinions are issued to illustrate the applicability of appraisal standards in specific situations and to offer advice from the ASB for the resolution of appraisal issues and problems.
SUBJECT: Use of an Automated Valuation Model (AVM)
APPLICATION: Real Property, Personal Property, Intangible Property
THE ISSUE:
What steps should an appraiser take when using an AVM as a tool in the development of appraisal, appraisal review, or appraisal consulting opinions and conclusions concerning an individual property?
In addition, what steps should an appraiser take when he or she is using an AVM only to process information and communicate the AVM’s output but is not performing an appraisal, appraisal review, or appraisal consulting assignment?
BACKGROUND:
This Advisory Opinion addresses how an appraiser may use an AVM.
An AVM is a computer software program that analyzes data using an automated process. For example, AVMs may use regression, adaptive estimation, neural network, expert reasoning, and artificial intelligence programs.
The output of an AVM is not, by itself, an appraisal. An AVM’s output may become a basis for appraisal, appraisal review, or appraisal consulting opinions and conclusions if the appraiser believes the output to be credible for use in a specific assignment.
An appraiser can use an AVM as a tool in the development of appraisal, appraisal review, or appraisal consulting opinions and conclusions. However, the appropriate use of an AVM is, like any tool, dependent upon the skill of the user and the tool’s suitability to the task at hand.
This Advisory Opinion applies when an appraiser uses an AVM in connection with an individual property. This Advisory Opinion does not apply to mass appraising.
An appraiser needs to know, before using an AVM, whether it is to be used:
to perform an appraisal, appraisal review, or appraisal consulting service, or
solely to provide the client with AVM output.
When an appraiser uses an AVM to develop his or her own opinions or conclusions in an appraisal, appraisal review, or appraisal consulting assignment, all of the USPAP rules governing that assignment apply and all of this Advisory Opinion is relevant.
An appraiser is not performing an appraisal, appraisal review, or appraisal consulting assignment when he or she simply runs an AVM by using information provided by the client and:
does not alter the input or affect the output of the AVM, and
does not communicate his or her own appraisal, appraisal review, or appraisal consulting opinions or conclusions regarding the AVM’s output.
If the appraiser uses an AVM only to provide the client with the AVM output, the references to the Conduct section of the ETHICS RULE and the “Communicating the AVM Output” section in this Advisory Opinion are relevant.
ADVICE FROM THE ASB ON THE ISSUE:
Under What Conditions May AVMs Be Used?
Understanding and Control of the AVM
Analyzing an AVM's Effectiveness
Review of the Output of an AVM
Review of an Appraisal Report Containing Output of an AVM
Use of an AVM in an Appraisal Review Assignment
USPAP 2008–2009 Edition
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