AVM Development

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AVM Development Use
Doug Ploetz, Chief Appraiser Farm Credit of
Western New York
Presented to 2006 RAAW Conference
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AVM History

• Base form developed by appraisers in the
  northeast through cooperation in the SAG
  (Strategic Appraisal Group)
• Has been used in WNY since 2002
• Used by both Credit staff and Appraisers
• Used for Credit appraisals and Fee Work

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AVM Development

• Sales Data and input was standardized
• Definitions of Land types and uses were developed
• Definitions for buildings and improvements were
  developed and include description of condition
• Uniformity of the Data input is extremely
  important

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Development

• Identified 26 market areas
• Used towns or counties as boundaries
• Land and building values based on 2 year averages
• Helps eliminate fluctuations caused by land
  quality fluctuations

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Ongoing Investment

• Sales Data Collection
• Sales Data is collected by both Loan officers and
  appraisers
• Loan Officers and appraisers together tour each
  market area to analyze sales
• Values for Each market area are updated at least
  annually

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Sample Building Description

• Dairy Facility- This is a freestall dairy
  facility which includes all dairy related
  structures/improvements Freestall barns, milking
  parlor, milk house, bunk silos, commodity shed
  and adequate heifer facilities, manure storage.
• Excellent- 4 or 6 row drive through freestall
  facility with rapid exit parlor, commodity shed,
  bunk silo and adequate heifer capacity. Dairy
  facility is generally less than 10 yrs old.
  Freestall barn will generally have 10 eave
  height, side curtains, misters or fans. May also
  include alley scrapers. Includes long term manure
  storage.
• Good- 4 or 6 row drive through freestall facility
  with milking parlor, commodity shed, bunk silo
  and heifer capacity. Facility is in good shape.
  May be 5-15 yrs old and lack some heifer capacity
  may be up to capacity in the parlor. Manure
  storage.
• Fair- Older freestall barn with low eave height,
  less than optimal cow flow and older milking
  parlor. May lack commodity shed and be short on
  heifer capacity and long term manure storage.
• Poor- 20 yr. old freestall facility, not a drive
  through design, low eave height. Older style
  parlor. This may include a portion of the
  facility being in an old conventional barn.
  Generally will include a bunk silo, and some
  heifer capacity.

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Sample Land Description

• Standard land breakdowns for all farms except
  fruit and grapes.
• Cropland A- Class I and II tillage
• Farmstead- Farmsteads
• Cropland B- Class II and III tillage
• Pasture B - Pasture
• Woodland B -Timberland and heavily wooded areas,
  with road frontage or other high quality access.
  These can be stand-alone parcels or a portion of
  a larger farm. To be marked on the plat with a
  "W"
• Woods/Brush/Other- wooded or brushy areas located
  in small pockets or if in larger parcels, they
  have poor access, i.e. no road frontage or high
  quality access. This category would also be used
  when Timber value is to be calculated separately
  from bare land value. To be marked on plat with
  an "O"

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Land Value Ranges
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Building Values
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Input Sheet
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Input Sheet Continued
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Western NY Market Area

• Values have been increasing steadily
• Values in a given market area reasonably uniform
• Farm types adapted to the AVM are
• Dairy Tree Fruit
• Cash Crop Vineyard
• Grain Part time farms
• Horse General Livestock

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AVM Used for Credit Appraisals

• Small and mid sized farms/rural property
• Vacant land
• Larger farms without complex facilities
• Loan officers use it for appraisals up to 1
  million
• Appraisers use it on appraisals on loans up to 2
  Million or larger

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AVM Use for Fee Appraisals

• Used where a value range is desirable such as
  estimating a sale or purchase price
• Faster turn around
• Somewhat lower cost to customer
• Not used for estate settlement, complex
  properties, or where there is potential of
  litigation.

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AVM Advantages

• Uniform range of value
• Easy for Loan officers to complete
• Fast turn around time- no sales to review
• From a credit perspective- generally value is on
  the conservative side
• Accepted by FSA on guaranteed loans (preferred
  lender)

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AVM Disadvantages

• Not automated YET
• Undervalues the high quality properties
• May overvalue a very poor property
• Not yet differentiating by property size- but
  could be done
• Does not work well/not intended for complex
  properties

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Overview

• To work well, the AVM must be used with some
  common sense and basic market knowledge
• Quick and efficient
• USPAP compatible with proper boiler plate

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Overview
90 of appraisals on property with loans under
1 million are completed on the AVM Collateral
Review on AVMs has proven valuation quality and
accuracy to be comparable to complete appraisals.
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Questions?
Thank You!