What is Forecast Standard Deviation (FSD)
The Forecast Standard Deviation (FSD) is a statistic that measures the likely range an Automated Valuation Model (AVM) estimate will fall within. It indicates your confidence in an AVM estimate using a consistent, standardized scale. Think of an archery target: the AVM estimate is the bull’s eye, and the FSD tells you into which ring around the bull’s eye the actual value of a property is likely to fall, as shown in Figure 1.
How to read FSD values
Lower FSDs indicate a more accurate AVM estimate. The FSD translates to the percentage amount above and below the actual value the estimate will fall.
On a scale from 0 to 1, an FSD typically ranges between .01 and .3. For simplicity, the decimal point is usually dropped and reported as a whole number. For example, .01 becomes 1 and .3 becomes 30.
Using FSD with AVM estimates
FSD relies on a 68 percent confidence interval. This means you can say with 68 percent statistical accuracy that the true property value lies within the upper and lower values dictated by the FSD.
For example, if an AVM returns an estimate of $100,000 with an FSD of 10, the value lies between $90,000 and $110,000. If the FSD is 30, the actual value will be somewhere between $70,000 and $130,000. Clearly, confidence is lower on the AVM estimate with the higher FSD, as shown in Figure 2.
GeoAVM Cascades accept estimates with an FSD less than or equal to 25. Estimates with an FSD greater than 25 lack sufficient confidence and are treated as no-hits.
AVM confidence scores
AVM confidence scores quantify accuracy and reliability to support your risk management and regulatory compliance. Cotality uses blind testing to ensure the AVM is unaware of actual sales activity on the subject property during valuation. This eliminates bias and strengthens your confidence in the results.
Cotality provides both the Confidence Score and Forecast Standard Deviation (FSD), allowing you to configure confidence thresholds that align with your specific risk standards.