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An appraiser wishes to rely on an AVM figure in developing an opinion of value. What is required?

Correct Answer

A) A basis for believing the output is credible

Why this is correct: USPAP requires the appraiser to have a reasonable basis for believing any tool or data used is credible. Simply accepting an AVM output without analysis violates the appraiser's responsibility to ensure credible results. Why the other choices are wrong: "Written permission from the model's vendor" is not a USPAP requirement. "That the model be registered with the state" is not a standard requirement. "That the client select the model to be used" does not relieve the appraiser of the responsibility to analyze its credibility. Exam tip: The appraiser is always responsible for the credibility of all inputs, including AVM outputs.

Answer Options
A
A basis for believing the output is credible
B
Written permission from the model's vendor
C
That the model be registered with the state
D
That the client select the model to be used

Why This Is the Correct Answer

Option A is right because a reasonable basis for believing the output is credible is what any input requires before it can be relied on. That basis is built the same way it is for any data source - examining the underlying information, testing the model's results against evidence the appraiser can verify independently, and understanding its limitations. An AVM that performs well on homogeneous tract housing may be useless on a custom property with no close analogues, and the confidence score the vendor supplies is a statement about the model, not about this assignment. Whatever role the figure ultimately plays, the workfile must contain support for it.

Why the Other Options Are Wrong

Option B: Written permission from the model's vendor

Vendor permission is a licensing matter between the appraiser and the software provider and says nothing about whether a number is reliable. A properly licensed model can still be wrong for a given property, and an unlicensed one is a contract problem, not a standards problem. Permission never establishes credibility.

Option C: That the model be registered with the state

There is no general requirement that valuation models be registered with a state as a condition of an appraiser using their output. Some jurisdictions regulate appraisal management and model use in particular lending contexts, and those requirements vary and are not uniform nationally, so a registration answer cannot be the general rule. The appraiser's obligation to establish credibility exists regardless of any registry.

Option D: That the client select the model to be used

Letting the client choose the model would hand a party with an interest in the outcome control over an analytical input, which is the opposite of independence. A client may specify assignment conditions and scope of work expectations, but the appraiser determines the scope necessary for credible results and remains responsible for the analysis. Client selection of a tool does not transfer responsibility for its output.

A model is a witness, not a judge

Treat an AVM like a witness whose testimony you must weigh, not a judge whose ruling you accept. Ask what it saw, when it saw it, and whether it has been right before in this neighborhood. If you cannot answer, you cannot rely on it.

How to use: For any question about a model, database, or third-party estimate, look for the answer about credibility and appraiser responsibility. Discard answers about permissions, registration, or client choice, none of which speaks to whether the number is right.

Exam Tip

If an AVM figure influences the conclusion, describe its use in the scope of work and keep support for it in the workfile; an undisclosed reliance is harder to defend than the number itself.

Common Mistakes to Avoid

  • -Accepting a model's output because a vendor confidence score is high
  • -Using a model outside the geography or property type it was built for
  • -Letting client selection of a tool substitute for the appraiser's own judgment
  • -Failing to disclose reliance on a model in the scope of work

Concept Deep Dive

Analysis

This question tests how an automated valuation model fits into a developed opinion of value. An AVM is a statistical model that produces an estimate from public records, prior sales, and other data, usually with a confidence measure attached. It is not an appraisal, because no appraiser exercised judgment in producing it, and its output is best understood as another piece of data the appraiser may consider. Standards Rule 1-4 requires an appraiser to collect, verify, and analyze all information necessary for credible assignment results, and Standards Rule 1-1 requires correct employment of recognized methods and avoidance of substantial error. Together those mean an AVM figure can inform an opinion only if the appraiser has a basis for believing it is credible for this property and this market - which requires knowing what data the model consumed, how current those data are, how the model performs in this geography and price segment, and how it treats condition and quality, which public records rarely capture. Where those things cannot be established, the number is a black box and importing it is an unsupported conclusion.

Background Knowledge

You need the definition of an appraisal as an opinion of value developed by an appraiser and the recognition that an AVM output is data rather than an appraisal, along with Standards Rule 1-4's requirement to collect, verify, and analyze the information necessary for credible results and Standards Rule 1-1's duties regarding recognized methods and substantial error. You should also know the SCOPE OF WORK RULE, since disclosing reliance on a model is part of describing the scope of work.

Real-World Application

An appraiser checking an AVM against her own analysis in a tract subdivision finds it tracks within a few percent across a dozen recent sales, which gives her a documented basis for using it as a reasonableness check. On a custom lakefront property with no close analogues, the same model diverges wildly and she does not use it at all.

automated valuation modelcredible resultsStandards Rule 1-4scope of workappraiser responsibility
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