This paper describes a method for automating sales comparison valuations by choosing a small sample of comparable sales from a submarket of similar properties and adjusting their prices based on differences between sale and subject property characteristics. This logic is similar to that used in a traditional sales comparison adjustment grid approach using, for example, FNMA Form 1004. Traditional appraisal methods select, adjust, and reconcile a few comparable sales. This valuation algorithm follows the same steps and, in addition, computes summary price prediction error statistics useful for evaluating and improving the valuation protocol. By calculating summary statistics on prediction errors, we can, in addition to automating the valuation process for samples of properties, automate aspects of the modeling improvement process.
Market approach to value, Statistics
An earlier version of this article was presented at the American Real Estate Society (ARES) 25th Annual Meeting in Monterey, California on April 3, 2009.
Krause, A., & Kummerow, M. (2011). An iterative approach to minimizing valuation errors using an automated comparable sales method. Journal of Property Tax Assessment & Administration, 8(2), 39-52. Retrieved from https://researchexchange.iaao.org/jptaa/vol8/iss2/3