AO 18 says that an AVM is not an appraisal? APB Advisory 5 defines the AVM product as a value. Is this a conflict?
AO 18 says an AVM is not an appraisal. FIRREA says that a residential appraisal must estimate "market value" when federal funds are involved. Thus, an AVM can never be a "value" as the AVM procedure does not include the complete valuation process in Standard 1 like an inspection and due diligence of the properties involved. Thus, is the new Advisory 5 incorrect when it states that the result is a "market value?"
The correct conclusion is that the AVM estimate is an "adjusted sales price" comparable to the one produced from the standard sales grid.
Many of the academic illustrations are defined incorrectly because academic researchers are not knowledgeable of FIRREA and USPAP. The tax assessor use of the phrase "market value" comes from the state legislative requirements. Parts of federal regulations are incorrect when the AVM label is used with "value" in the same sentence.
There exists a disconnect in this country in the interpretation of the result produced from a computer-assisted model. In the real estate industry, we should follow and emphasize the requirements of law and standards. That means that the AVM should be re-labeled "CAM" for "computer assisted method" and the result interpreted as an adjusted sales price.
Open Jul 22, 2016 - 07:08 AM
A) 18, market value, AVM interpretation