AVM Glossary

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  • p

  • The sale price that results from adjustments made to the stated sale price to account for the effects of time, personal property, atypical financing, and the like.
  • Price Dispersion refers to the situation in which two identical commodities sell for different prices at the same point in time and at the same location, a concept related to the law of one price and arbitrage pricing. In housing markets, for price dispersion to exist, the variance in house prices cannot be attributed completely to any remaining heterogeneity between two very similar house located very near each other. Any unexplainable price variation is then called price dispersion.
  • A measure of AVM precision. The PRB is the slope in the regression of the AVM valuation-to-sales price ratios (adjusted by the median ratio) on a proxy variable that measure the value of the house. The proxy value variable is the natural log of the average of selling price and AVM valuation (all divided by 0.693). The PRB coefficient shows whether an AVM's valuation-to-sales price ratios are systemactially higher, lower or steady as values increase. A negative value indicates regressivity, while a positive value indicates progressivity.
  • The PRD is mean (valuation-to-selling price) ratio divided by the weighted (by selling prices) mean ratio. The PRD assesses the level of uniformity in AVM valuation-to-sales price ratios between low and high values properties. The statistic has a slight bias upward. Price-related differentials above 1.03 tend to indicate assessment regressivity; Price-related differentials below 0.98 tend to indicate assessment progressivity. Used as a measure of AVM precision.
  • (1) The actual amount of money exchanged for a unit of goods or services, whether or not established in a free and open market. An indicator of market value. (2) Loosely used synonymously with "offering" or "asked" price. Note: The sale price is the "selling price" to the vendor and the "cost price" to the vendee.
  • The principle of change asserts that all markets are in a continual state of change. According to this principle, properties generally go through the three stages of integration (development), equilibrium (stasis), and disintegration (decline).
  • The principle of conformity states that the value of a group of properties will rise to its highest possible level in an area where architectural styles are reasonably homogenous and surrounding land uses are compatible with the use of the specified properties.
  • The principle of contribution requires an appraiser to measure the value of any improvement to a property by the amount it contributes to market value, not by its cost.
  • The principle of progression holds that the worth of an inferior property is increased by its proximity to better properties of the same use class.
  • The principle of substitution states that no buyer will pay more for a good than he or she would have to pay to acquire an acceptable substitute of equal utility in an equivalent amount of time.
  • See assessment progressivity (regressivity).
  • (1) An aggregate of things or rights to things. These rights are protected by law. There are two basic types of property: real and personal. (2) The legal interest of an owner in a parcel or thing (see bundle of rights).
  • A technique used to estimate the value of a property from a knowledge of its net operating income, discount rate, remaining economic life, the amount of the reversion, and the income path attributable to the property over the holding period (generally the remaining economic life of the property). The technique estimates total value by discounting anticipated income and adding the result to the present worth of the reversion.
  • See bundle of rights.
  • See assessment base.
  • Any purposeful course of action by governmental bodies that affects or determines the way property taxes are created, levied, collected, or spent. Property tax policy issues can include determining the division of responsibility between local and state/provincial governments, equalization, appeals, public relations, reappraisal systems, the market value standard, exemptions and abatements, fractional assessments (ratios), and limits on taxes and assessed values.
  • See tax, general property; tax, property; tax, special property.
  • A United States Census Bureau classification scheme based on actual utilization of real property. There are seven classes of real property: Acreage (or "Acreage and Farms") - Includes farms, timberland, recreational acreage, idle land, and waste land in rural locations. Excludes vacant platted lots that lie within or adjacent to a municipality and that usually carry a lot/block system designation rather than acreage. Separately assessed timber or mineral rights are omitted from this category. Commercial Property - Generally any nonindustrial, nonresidential realty of a commercial(...)
  • States where the tax assessment value is based on the acquisition price rather than the property’s current market value. Tax assessment models do not work in these states.

  • q

  • A property transfer that satisfies the conditions of a valid sale and meets all other technical criteria for inclusion in a ratio study sample. If a property has undergone significant changes in physical characteristics, use, or condition in the period between the assessment date and sale date, it would not technically qualify for use in ratio study.
  • Pertaining to the subjective nature of some variable of interest. For example, view, fire protection, quality, or site/location.
  • Something that can be appreciated but not objectively reduced to an unambiguous scale. For example, view is a qualitative variable.
  • A subjective classification of a structure by an appraiser, intended to describe materials used, workmanship, architectural attractiveness, functional design, and the like. Quality class, or its synonym "grade," is the key variable in most cost schedules.
  • Pertaining to the objective nature of some variable of interest, that is, something that can be measured or counted with little ambiguity. For example, number of bathrooms is a quantitative variable.
  • The values that divide a set of data into four equal parts when the data are arrayed in ascending order. The first quartile includes the lowest quarter of the data; the second quartile, the second lowest quarter, and so forth.
  • A transformation of two or more variables accomplished by dividing one by the other. For example, the length of a room is a quotient transformation of its area and its width. Like the multiplicative transformation, many useful quotient transformations are less intuitively obvious than the one in the example given.

  • r

  • The radius of the circle that encompasses all of the Comps to indicate the relative distance of the Comps to one another and the Subject Property.
  • A sample for which each item of the population has an equal chance of being included and, by extension, each possible combination of n items has an equal chance of occurrence.
  • (1) The maximum value of a sample, minus the minimum value. (2) The difference between the maximum and minimum values that a variable may assume.
  • (1) The position of an item relative to others in a set ordered according to the value of each member of the set in relation to the others. (2) The act of ordering the members of a set according to the value of each member in relation to the others. For example, the numbers 0.95, 0.87, 1.09, and 0.83 have ranks of 3, 2, 4, and 1. See Spearman rank test.

Sources:

a)       AVMetrics

b)      AVMs 201: A Practical Guide to the Implementation of Automated Valuation Models, Jim Kirchmeyer, 2008.

c)       IAAO 2015, Glossary for Property Appraisal and Assessment, 2015. (2013 online: https://www.iaao.org/media/Pubs/IAAO_GLOSSARY.pdf )

d)      Collateral Assessment & Technologies Committee, Summary of Definitions & Terms, 2006.

e)      Joint Industry Task Force on AVMs, IAAO Standard on AVM Glossary, September 2003. https://www.iaao.org/media/standards/AVM_STANDARD.pdf

f)        Appraisal Institute, Joint Industry Task Force on Automated Valuation Models, Work Group Terminology, 2005.

g) Merriam-Webster (https://www.merriam-webster.com/)