A system applies AVMs in a predetermined sequence, moving to the next when an earlier result fails its specified acceptance criteria. What is this arrangement commonly called?
Correct Answer
A) An AVM cascade
An AVM cascade uses a model preference order and usage rules, such as model-specific acceptance thresholds, to select an output. The order need not prove that the chosen number is most accurate for every property. Evaluate the models and the cascade’s selection rules and performance, including fallback segments. Do not assume unlike vendor confidence scores share a scale without checking definitions and calibration. A repeat-sales index is a different technique for estimating price change.
Why This Is the Correct Answer
Option A is correct because an AVM cascade uses a model preference order and usage rules, such as model-specific acceptance thresholds, to select an output. If the first model's result does not meet its criteria, the system moves to the next model in the sequence. The order reflects the user's rules and does not by itself prove the chosen value is the most accurate for every property.
Why the Other Options Are Wrong
Option B: A repeat-sales index
Option B is wrong because a repeat-sales index is a technique for estimating price change over time from properties that sold more than once. It does not describe selecting among several AVMs in sequence.
Option C: A paired-sale adjustment
Option C is wrong because a paired-sale adjustment compares sales that differ mainly in one feature to estimate that feature's contribution to value. It is a sales comparison technique, not a method for ordering AVMs.
Option D: A capitalization-rate survey
Option D is wrong because a capitalization-rate survey gathers market cap rates for income property valuation. It has nothing to do with running AVMs in a predetermined order.
Cascade flows down the list
Like water falling from one step to the next, a cascade drops to the next AVM whenever the one above fails its acceptance test.
How to use: Use this image when a question describes models tried in order with fallback rules.
Exam Tip
Words like predetermined sequence, preference order or fallback when a result fails point to a cascade. Remember that a cascade's order does not prove the selected value is the most accurate.
Common Mistakes to Avoid
- -Assuming the model chosen by a cascade is the most accurate for every property
- -Treating confidence scores from different vendors as if they share one scale
- -Confusing an AVM cascade with a repeat-sales index
Concept Deep Dive
Analysis
This question tests the name for a system that runs AVMs in a preset preference order, moving down the list when a result fails acceptance criteria. The description of sequence plus fallback rules points to a cascade. The other options are unrelated valuation techniques.
Background Knowledge
Lenders and other users often have access to multiple AVMs and set up cascades to pick one result per property based on preference order and acceptance thresholds. Evaluating a cascade means examining the models, the selection rules and their performance, including fallback segments, and checking that confidence scores from different vendors are actually comparable.
Real-World Application
A lender's system first tries its preferred AVM, but the result falls below that model's confidence threshold for a rural property. The cascade moves to the second model, whose result passes, and a reviewer later checks how often fallback models are used in rural areas and how well they perform there.
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