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I have a copy of an AVM !?!?!?

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Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Just received a copy of the AVM used for one I posted about a few weeks ago. I had appraised the property for $124,000 and all hell broke loose because 4 months earlier the owner had an equity line of credit based on what his bank called an "Appraisal" and they had told him it had appraised for $135,000.

He just faxed me a copy of the AVM that his bank had used.

Date was 07/16/2002

Value: $135,000
Confidence: 76 (whatever that means)
Highest Reasonable: $148,000
Lowest Reasonable: $120,000

NOW - the sales used are:

08/2001 - $127,000
11/2001 - $121,000
01/2002 - $119,000
01/2002 - $120,000
02/2002 - $115,000
03/2001 - $118,500

SOMEBODY EXPLAIN TO ME HOW THEY CAME UP WITH $135,000 USING THESE SALES!!!!!!!
 

Neil (Texas)

Sophomore Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Texas
MAGIC.

Thanks for the morning chuckle.
 

Bobby Bucks

Elite Member
Joined
Jan 27, 2002
Professional Status
Real Estate Agent or Broker
State
North Dakota
Pamela it’s quite simple......sorry for a repeat, but here goes,


In the final reconciliation of value, the sales comparison analysis and the cost approach were not considered and the income approach was not applicable. The sole consideration was given to the needed value approach. :)
 

Wally Jones

Senior Member
Joined
Jan 23, 2002
Professional Status
Certified Residential Appraiser
State
Florida
"Multiple Regrettable Analysis"

8)
 

Carnivore

Elite Member
Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Pamela,

I recall about a year ago I got reviewed. The Lender used an AVM. They made me jump through hoops to defend my low opinion of value. At first I was frustrated, and then realized the best defense was an offense. So I ask to see the comps they used. There were a total of 6 comps. Interestingly three of the comps had the exact same sale price and sale date. I pulled up the deeds on each one and realized that this was a investor package deal. So the $150,000 sale price was actually the sum total of all three. I then looked up the others and found all of them to be vastly superior to tax card info. Well after some back and forth I finally got them off my back.

Get ready for more of this. AVM's are trash in metro areas. For example the Charlotte area has many many sub-markets some are within the same census tract. Mix use, changed use, etc etc. Its all tainting the AVM pool. This is a good thing for us. Now if we can just convince banks that AVM companies are lieing about there data.
 

slacker

Junior Member
Joined
Feb 20, 2002
...Confidence: 76 (whatever that means)...

SOMEBODY EXPLAIN TO ME HOW THEY CAME UP WITH $135,000 USING THESE SALES!!!!!!!

At first glance it looks like their confidence level is based on 100%. Similar to one of Austin's regressions, but obviously not a regression model here.

Their 76% leaves 24% to make 100%

Add 24% to all those sales and I bet it comes close to a value of 148k or their high end.

Leave it as it is and it looks like about 120k or their low end.

That's a spread of 28k. Half of that is 14k. Add that to the 120kand Presto 134k
.

They probably just threw in an extra 1k for good measure or perhaps rounding.

No algorithm required..............................
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Pamela,
8O What was the homeowners response to this AVM when he saw it?
 

Dale Smalley

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Pam you forgot to add the LO commision and fees.
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Pam: 76% confidence means there is a 76% probability that the price estimate will fall within the range of $120,000 to $148,000, which it apparently did. Next question is how can the AVM come up with $135,000 based on those comparable sales none of which is higher than $127,000? It is in the algorithm they are using. What they are doing is taking the sales listed, going back in history to the last two times each was sold, extracting the compound rate of price increases between sales and averaging it, then taking the last sale price of the subject and extrapolating the present value from the last sale date up to the date of appraisal. I tested some on line versions of AVM once. I took a house that sold twice in the 1970’s when prices sky rocketed from 1975 to 1980. The actual market value of the house at the time I did the test was about $45,000. The AVM said it was $96,000 in a range of $85,000 to $115,000 with about 75% confidence. I was talking to the tax assessor recently and he told me about a person calling asking why his house was assessed at $20,000 when he just paid $55,000 for it. The average price for this neighborhood was $25,000 and rapidly declining. Turns out that the property owner purchased the home from a bank employee who got his bank to make the loan and did the appraisal on the Internet. There are hundreds of different algorithms for AVM’s. When you test these AVM’s in a cookie cutter subdivision of 300 similar houses with lots of recent sales, they give the appearance of a high degree of accuracy. Based on my limited experience with them in this market, their averages error is to over value the property by 200%. That is why I promote AVM every chance I get. I can envision the potential future business they will generate. Did you guys see that program on TV last night about ENRON call “The Crooked E”? Next we will see a program about CONSECO and the star will be a young appraiser that did work for CONSECO Financial or Green Tree. All of the luster was worn off the Harvard School of Business last night. ENRON was the largest corporate bankruptcy in American History. CONSECO was the third largest corporate bankruptcy in American History. Anybody want to get up a pool on who will be next?

Sorry Wally, this has nothing do with multiple regression analysis. AVM & MRA are not remotely similar.
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Pammie,
So how much did the AVM get paid?

And, so why can't I have my dog run
my AVM business...I'll enter the basic
data and he can paw the return and
we'll both be USPAP compliant.

elliott

Jake's AVM & Security Co.
 
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