IAAO releases updated standard to assist with automated valuing of properties
KANSAS CITY, MO - The International Association of Assessing Officers has released a revised standard on Automated Valuation Models (AVMs)
which will help public and private entities to quickly produce estimates of market values based on market analysis of location, market conditions, and real estate characteristics.
The IAAO Executive Board adopted the revised standard which had been rewritten to bring it up to date with changes in the marketplace and make it easier to use by governments, businesses, and individuals to estimate current property values.
Automated valuation models (AVM) are algorithms that can provide real estate property valuations using mathematical modelling combined with accessing databases with relevant information on properties. The revised AVM standard was adopted by the IAAO Executive Board in July and a copy is available from the IAAO website. The previous version of the standard was adopted in 2003.
“The new standard will be beneficial for all those that use AVMs as it provides guidance on how to set up and test AVMs to move towards getting the most accurate data,” said August Dettbarn, Chair of the AVM Standard Review & Edit Task Force. “AVMs are used by everyone from appraisers and assessors to bankers to gauge the value of individual or multiple properties. In addition to being used by established government jurisdictions and businesses, AVMs are of great interest in developing countries who are trying to set up a property taxation system.”
The revised AVM standard provides guidance for public and private sector property valuation that depend on AVM systems. AVMs can be used when there is adequate economic data to permit development of representative and valid statistical samples. Models that adhere to the best practices for data verification, data analysis, market analysis, and ongoing quality control present the most reliable value estimates.
The purpose of an AVM is to efficiently provide an accurate, uniform, equitable estimate of fair market value. “Fair market value” means the amount in terms of money that a well-informed buyer is justified in paying and a well-informed seller is justified in accepting for property in an open and competitive market, assuming that the parties are acting without undue compulsion.
The new standard has two parts, the first reviews the general principals regarding AVMs and people working with them to understand the best practices in AVM, and the second part will have an appendix which will review how to set up an AVM.
“The idea is to allow everyone from a COO and down to the technicians building the AVM to understand the best practices in Automated Valuation Modeling and also have an appendix will have the actual nuts and bolts of how you put together an AVM,” said Dettbarn.
IAAO is the leading nonprofit, educational and research association for individuals in the assessment profession and others with an interest in property valuation and taxation. IAAO's mission is to promote innovation and excellence in property appraisal, assessment administration and property tax policy through professional development, education, research, and technical assistance. IAAO currently serves nearly 8,000 members worldwide.