Property Valuation
A Washington residential appraiser is reviewing an automated valuation model (AVM) output for a property. The appraiser should treat AVM values as:
ADefinitive and binding on their own appraisal
BOne data point to be considered alongside other market evidence, not a replacement for professional appraisal analysis✓ Correct
CMore accurate than the appraiser's own analysis
DIrrelevant and to be ignored in USPAP-compliant appraisals
Explanation
AVMs can be useful data tools, but they cannot replace professional appraisal analysis. They don't inspect properties, cannot adjust for unique features, and can be unreliable in rapidly changing or thin markets.
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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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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.
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