Residential Properties Appraisal Application-ECO6416

Residential Properties Appraisal Application-ECO6416 -...

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Residential Properties Appraisal Application Estimating the market value of large numbers of residential properties is of interest to a number of socio-economic stakeholders, such as mortgage and insurance companies, banks and real- estate agencies, and investment property companies, etc. It is both a science and an art. It is a science, because it is based on formal, rigorous and proven methods. It is an art because interaction with socio-economic stakeholders and the methods used give rise to all sorts of tradeoffs and compromises that assessors and their organizations must take into account when making decisions on the basis of their experience and skills. The market value assessment of a set of selected houses involves performing an assessment by a few individual appraisers for each property and then computing an average obtained from the few individuals. Individual appraisal refers to the process of estimating the exchange value of a house on the basis of a direct comparison between its profiles and the profiles of a set of other comparable properties sold on acceptable conditions. The profile of a property consists of all the relevant attributes of each house, such as the location, size, gross living space, age, one-story, two-story or more, garage, swimming pool, basement, etc. Data on prices and characteristics of individual houses are available; e.g., from the U.S Bureau of the Census. Often regression analysis is used to determine what characteristics influence the price of the houses. Thus it is important to correct the subjective elements in the appraisal value before carrying out the regression analysis. Coefficients that are not significantly different from zero as indicated by insignificant t-statistics at a 5% level are dropped from the regression model. There are several practical questions to be answered before the actual data collection can take place. The first step is to use statistical techniques, such as geographic clustering, to define homogeneous groupings of houses within an urban area. How many houses should we look at? Ideally, one would collect information on as many houses
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This note was uploaded on 10/06/2011 for the course ECO 6416 taught by Professor Staff during the Spring '08 term at University of Central Florida.

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Residential Properties Appraisal Application-ECO6416 -...

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