Chief Appraiser says AVM is an appraisal
Maybe I’m too much of an anal retentive type person, or perhaps it’s because I believe it’s important to use correct terminology.
Regardless, I’m very concerned when someone with Chief Appraiser attached to their name attributes an AVM electronic value statement to an actual appraisal opinion produced by a human.
So where did this rant come from, you ask?
Within the article is this statement by the writer:
“While AVMs do hold value — they are a cost-effective, fast tool to produce appraisals — the popularity of AVM usage among home equity lenders has been a large contributor to loss mitigation and defaulted loans. These valuation products may be more cost-effective than traditional appraisals — costing $12 to $15 per address versus upwards of $500 — but they often lead to discrepancies because they lack the precision of an inspection-assisted valuation report. It is not uncommon for AVMs to produce unconfirmed, arbitrary values and information.”
The definition of an appraisal, per the Dictionary of Real Estate Appraisal, 4th Edition:
“(n) The act or process of developing an opinion of value; an opinion of value.”
That same dictionary says, in the definition of an AVM:
“Note that the output of an AVM is not, by itself, an appraisal.”
These definitions were first revealed in the 2002 USPAP, so they’ve been around for almost 14 years.
Another item of note: The GSE appraisal forms prior to 2005 said the value statement was an ESTIMATE of Value. In 2005, form terminology was changed to an OPINION of Value, to align that with the 2002 USPAP definition.
Humans give opinions, and do appraisals. Computers, and AVM’s, merely generate numbers.