Can Statistical Analysis AID Appraisers In Residential Valuation?
The following is an excerpt from the AEP - The Other Market Model article below:
"The feedback approach to estimating the most probable sales price for a property or properties is based on use of a local appraisal professional who lists the set of property descriptors that are the best predictors of value in a particular market.
This method uses the generally accepted belief that the single most important factor in valuing real estate is location. However, it also recognizes that descriptors of the improvements of the land (such as frontage and size), will set the specific price of the individual property.
By comparing all of the sales prices in one neighborhood with all of the sales prices in other neighborhoods, it is possible to measure the amount of value that is added (or subtracted) from the typical parcel because of a particular location.
Similarly, the typical price of a square foot of living area can be computed by comparing all of the sales prices on the variable of size. If this is done for each of the descriptors, and the change in prices (values) over time is taken into account, then a formula can be derived that applies to all of the properties."
"This kind of formula can produce very good value estimates that can be understood and accepted by property owners. Because feedback uses a small number [of homes] — typically about a dozen" - data requirements are well within the scope of most residential assignments.
Here are some articles and papers describing the process . . . .
