Valuation Models: AVM & Mass Appraisals

Instructor: Marc Willcuts

Marc Willcuts has been an active Realtor since 2014 and has a passion for helping others learn the profession.

In this lesson, we will learn about mass appraisals and, more specifically, the AVM method. We will go into detail about the advantages and disadvantages as well.

What Is a Mass Appraisal?

A mass appraisal is a method of determining the value of a property using a large number of homes for comparison. Mass appraisals do not put as much weight on recent sales as a physical inspection appraisal would. Instead, they use a combination of data points for each home, usually including an inventory of property characteristics and relevant sales information.

Before the advent of computers, appraisers would then use a state provided manual that contained guidelines for determining what value each data point added to the subject property This set of guidelines is called a valuation model. Now, since we have computers, those guidelines can be programmed into software that then uses the data to automatically determine the value of the subject property.

AVM Method

Automated Valuation Models, or AVMs, are the standard that appraisers conducting mass appraisals use. Another name for an AVM is Computer Aided Mass Appraisal System, or CAMA. There are many different specific software companies that use their own algorithm in how each data point is used to determine value. AVMs make the mass appraisal process much more simple. The steps to conducting a mass appraisal through any given AVM are:

  1. Data Gathering - The appraiser gathers all necessary information for the area in which they are conducting the appraisal.
  2. CAMA Modeling - The appraiser edits the values of certain features. For example, in some areas pools may be more common, so value is added differently than areas where pools are less common.
  3. Application of the Model - All of the information the appraiser is using is put to use in the computer system.

Benefits and Uses

Why would someone want a mass appraisal when they aren't quite as accurate as a standard residential appraisal? The main application of these appraisals is assessing taxes. When a tax assessor is valuing property, they are generally working with hundreds of properties at a time. For that reason, it is much quicker to use a mass appraisal to find a rough estimate of value rather than specifically appraising each property personally to get a more accurate value. It is also for this reason that even though you could complete many appraisals in a short period of time, you wouldn't want to use this method when finding the value of a property for the purpose of a purchase or a refinance.

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