A vendor will not disclose how its model reaches an estimate. What does this mean for the appraiser?
Correct Answer
C) It is harder to judge whether reliance is reasonable
Limited methodological information makes it harder to judge applicability and reasonable reliance. Obtain sufficient understanding of the model’s inputs, methods and limitations for the use contemplated, and evaluate its performance and output where appropriate. Output testing helps, but is not an automatic waiver of the appraiser’s methodological obligations. If adequate support cannot be obtained, do not rely on the output in a way that undermines credible results. Responsibility does not transfer to the vendor.
Why This Is the Correct Answer
Option C is correct because limited methodological information makes it harder to judge applicability and whether reliance is reasonable. The appraiser should obtain enough understanding of the model's inputs, methods and limitations for the contemplated use and evaluate its performance and output where appropriate. If adequate support cannot be obtained, the appraiser should not rely on the output in a way that undermines credible results.
Why the Other Options Are Wrong
Option A: The output cannot be used in any circumstances
Option A is wrong because nondisclosure does not mean the output cannot be used in any circumstances. It makes judging reliance harder, but the appraiser may still be able to evaluate the output for an appropriate use.
Option B: The vendor assumes responsibility for the result
Option B is wrong because the vendor does not assume responsibility for the result. Responsibility for the analysis and conclusions remains with the appraiser.
Option D: The model must be registered before it is relied upon
Option D is wrong because there is no general requirement that a model be registered before it is relied upon. The issue is whether the appraiser can judge reliance to be reasonable, not registration.
Black box, harder judgment
When you cannot see inside the model, it is harder to know whether to trust it, and the responsibility is still yours.
How to use: Use this when a question asks what an undisclosed model methodology means for the appraiser.
Exam Tip
Avoid answers that ban the output outright or shift responsibility to the vendor. The balanced answer says reliance becomes harder to justify.
Common Mistakes to Avoid
- -Assuming the vendor bears responsibility for model output
- -Believing undisclosed models can never be considered
- -Inventing a registration requirement for models
Concept Deep Dive
Analysis
This question tests the effect of a black-box model on reasonable reliance. When a vendor does not disclose its methodology, the appraiser has less basis to judge whether the output applies and whether relying on it is reasonable. Responsibility stays with the appraiser and does not shift to the vendor.
Background Knowledge
Proprietary models often do not reveal how they compute estimates. Institutions are expected to perform due diligence on AVM vendors and models, including how performance testing was conducted, and appraisers must understand a tool well enough to judge whether relying on it is reasonable.
Real-World Application
A vendor declines to explain how its model weights property features. The appraiser tests its output against recent verified sales in the neighborhood and, finding large unexplained errors, gives it no weight in the analysis.
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