Property Valuation
In Michigan, an 'automated valuation model' (AVM) is:
AA state-approved substitute for a licensed appraisal
BA computer-generated estimate of property value using statistical models and public data, not a substitute for a full appraisal✓ Correct
CA required component of every Michigan residential appraisal
DUsed only for commercial properties
Explanation
AVMs (such as Zillow's Zestimate) use algorithms and public data to estimate property value. They are useful tools for quick estimates but are not licensed appraisals, may lack accuracy for unique properties, and are not substitutes for formal appraisals required by lenders.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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