Tuesday, April 11, 2017

Why Property Tax Appeals Consultants MUST Use AVM Values - Upfront - to Validate Values on Tax Roll

Here are the reasons why Property Tax Appeals Consultants must use AVM values - upfront - to scrutinize the Tax Roll:
1. Comparing independently developed Automated Valuation Model (AVM) Values to County Market Values (CMV) will point to the areas of failure, meaning over and under valued (leading to assessments) on the Roll. Often, the higher value properties are under-assessed while the lower value properties are over-assessed. If the comparison of "AVM to CMV" points in that direction, the Property Tax Appeals Consultants ("Consultants") must work up a small sample - using comps - to further authenticate the discovery. If the comps sample validates the discovery, Consultants must pay special attention to that over-valued (assessed) segment of the population.
2. In choosing AVM Vendors, Consultants must make sure that those AVM Values are developed specifically for the Tax Status Date. If the Tax Status Date is 01-01-2017 but the AVM Values were developed in June 2016, those values would produce a flawed picture when connecting to the County Values. It is therefore advisable to work with AVM Vendors that develop specialized models for the Appeals industry, per se.
3. Many AVM Vendors also sell Comps Reports. However, the Appeals Consultants must be careful in working with the specialized AVM Vendors that additionally tie their AVMs to the Comps production. In other words, the specialized AVM Vendors who use the model coefficients to adjust their comps via the Comps Adjustment Matrix do not necessarily produce the most optimal comp reports as AVM (top down) and comps reports (bottom up) are diametrically opposite solutions. If a Consultant is looking for a long-term AVM vendor, this is a question always worth asking, meaning if they tie their comps (reports) to the model coefficients.
4. In course of the due diligence Consultants may ask for a sample Adjustment Matrix for the comps production. The sample itself could say a lot about the quality of their valuation process. For example, if the Comps Adjustment Matrix shows a 'Lot SF' coefficient of .10 (10 cents per Lot SF, assuming it's transferred from the regression model producing the AVM model values), just dump them and move on (Hint: it's not multi-collinearity). It would be a clear indication that they are working with totally unqualified "make-shift" modelers. While no AVM Vendor would be forthcoming to show their AVM models, they might share a sample Comps Adjustment Matrix. It could be telling!

FYI - many such Consultants use our free Homequant site to work up samples. Our site, unlike other free valuation sites, allows users to arrive at their own value conclusions. Homequant is a true valuation site with advanced features like specific comps selection and adjustment mechanism, distance matrix, time adjustment, flexible valuation date, multiple ranking methods, interactive spatial interface, comps grid, value analysis, to name a few. In addition, no log-in or registration is required.

To learn more about AVM, you may read our trend-setting books on AVM (search 'Sid Som's Books' on Amazon).

Sid Som
President, Homequant, Inc.

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