Understanding and Control of the AVM (AO-18)

When using an AVM in an appraisal, appraisal review, or appraisal consulting assignment, an appraiser should have a basic understanding of how the AVM analyzes data to determine whether the AVM measures and reflects market activity for the subject property. The appraiser does not need to know, or be able to explain, the AVM’s algorithm or intricacies of its statistical or mathematical formulae. However, the appraiser should be able to describe the AVM’s overall process and verify that the AVM is consistent in producing results that accurately reflect prevailing market behavior for the subject property.

AVMs differ in the number and type of data characteristics as well as in the volume of data analyzed. The appraiser should know which characteristics (e.g., size, location, quality) are analyzed and how the analysis is tested for accuracy and reasonableness. The appraiser should ascertain that the characteristics analyzed are those to which the market responds.

Some AVMs allow the appraiser to select the data analyzed on the basis of, for example, distance from subject, size, or age of the improvements. An appraiser’s ability to change the AVM’s selection parameters may affect the appraiser’s decision to use or rely on the AVM output.

The appraiser should be aware that the AVM may not perform consistently given the same input criteria. The appraiser should be confident of the AVM’s credibility when applied to a specific property. The appraiser decides whether to rely on the AVM output, regardless of the AVM’s overall test performance. In some cases, the appraiser may accept the AVM’s output, while in other cases that same AVM’s output would not be acceptable.

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