Automated Valuation Model - AVM

  

Automated valuation models are used in real estate to value properties without a human appraiser having to painstakingly work out a figure by hand. The process uses computerized algorithms that take into account certain traits (like size, location, age, etc.) to arrive at a number, replacing some guy walking around your house with a clipboard. Yes, think: ZILLOW.

For the most part, the AVM process compares a property to other properties and then estimates a value based on sale prices of similar real estate. In that way, it works like the "You May Also Like" feature on streaming movie services. Though that's probably not a great endorsement: Hey Netflix, just because we liked Avengers doesn't necessarily mean we want to watch Mark Ruffalo in 13 Going on 30...

Related or Semi-related Video

Finance: What are normalized earnings?5 Views

00:00

Finance allah shmoop what are normalized earnings All right this

00:07

is norm or it's supposed to be We just couldn't

00:10

get the licensing rights from him So this is our

00:12

public domain version of norm from cheers Sorry And this's

00:17

normal that's a bell curve Yeah you're in the ebola

00:21

abatement business Each year the government spends a few bucks

00:25

on you Just keep you alive Is a business in

00:28

case Well you know a few hundred million peoples faces

00:31

start melting off like you know that scene in indiana

00:34

jones you know the good ones so your earnings are

00:38

usually here and here and here and here a buck

00:41

a buck twelve twenty three twenty four years I'm like

00:43

that But then one year after miss malaria's high school

00:46

biology class takes a field trip to study monkeys bats

00:50

and beetle crap in caves in central ghana Well your

00:54

business picks up So this year when the gove is

00:57

having to spend a fortune on ebola abatement you were

01:00

nine dollars and forty two cents a share And since

01:04

world awareness has suddenly shot up the most popular yahoo

01:07

search term index that thing well next year you'll still

01:11

learn five seventeen to share even though most the ebola

01:14

is pretty much gone now But then things quiet down

01:16

in life goes back to normal where your earnings are

01:21

you know normal and you could plot some kind of

01:23

line through them And if someone asked you what normalized

01:27

earnings are in your little ebola abatement company well you

01:30

could say that your normalized earnings are in about a

01:34

buck twenty Well fortunately making out with the nigerian fruit

01:37

bat is not normal so you probably don't have to 00:01:40.539 --> [endTime] worry about contracting ebola Ooh

Up Next

Finance: What is a WACC Model?
18 Views

WACC is an acronym for weighted average cost of capital. A company can raise money either through selling equity or by raising debt. When measuring...

Finance: What are Market Metrics?
187 Views

What are market metrics? Market metrics are all of the figures used to determine how well a company is performing and whether an investment should...

Finance: What is Discounted Cash Flow?
9 Views

What is Discounted Cash Flow? Discounted Cash Flow is a model that’s used to determine the value of an investment or company. It’s pretty compl...

Find other enlightening terms in Shmoop Finance Genius Bar(f)