Are AVMs Appraisals?

Editor's Note: In our cover story last issue, "AVM Tango! Man or Machine?" we reported that as a result of our AVM questions, Appraisal Standards Board (ASB) Chair Greg Accetta indicated further clarification would be forthcoming. Here is a statement issued by the Appraisal Foundation in June 2007 (www.appraisalfoundation.org).

Are AVMs Appraisals?

Appraisal Standards Board on AVMs

Question: Are the results from an Automated Valuation Model (AVM) an appraisal?

Response: No. Advisory Opinion 18, Use of an Automated Valuation Model (AVM), states: An AVM's output is not, by itself, an appraisal, and communication of an AVM's output is not, in itself, an appraisal report.
 

An AVM is a tool that delivers an estimation or calculation, whereas an appraiser arrives at a value opinion by applying his or her judgment and experience. An appraisal is defined as "an opinion of value," which is distinctly different from an estimate or calculation of value. An AVM uses automated processes and cannot produce an opinion of value because only individuals can exercise judgment and form opinions. An AVM is just one tool among many that an appraiser might use to arrive at an opinion of value.

Appraisers are cautioned that this response is based on the USPAP definition of "appraisal." Jurisdictions that use a different definition of "appraisal" may reach a different conclusion.

Appraiser's USPAP Obligations When Using an AVM

Question: What are an appraiser's USPAP obligations when using an Automated Valuation Model?

Response: Many appraisers use calculators, spreadsheets, analytic software, and similar tools to analyze market data and calculate assignment results. The nature of the appraiser's service and how these tools are used are important factors in recognizing USPAP obligations.