1. A major limitation of an automated valuation model (AVM) is that it:
Answer & explanation
Answer: A. AVMs are fast and inexpensive but assume average condition and struggle with unique homes and thin data.
valuation
automated valuation model
An automated valuation model, or AVM, is a computer program that estimates a property's value using statistical analysis of public records, recent sales, tax assessments, and market trends. AVMs are quick and inexpensive and are used by lenders, investors, and consumer websites, but they do not inspect the property and may be inaccurate for unique homes or areas with few sales.
- Exam tip
- An AVM is not an appraisal because no appraiser inspects the property or applies judgment. Accuracy depends on data quality and the number of comparable sales.
- Example
- A homeowner checks an online estimate showing her house at $460,000, but an appraisal that accounts for her new kitchen comes in at $485,000.
Related terms & state variants
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Last verified: 2026-10-23