Books & Appraisal Institute Course
Multiple regression analysis is a powerful tool that is applied to analytical problem solving both in academic research and industry. The RealStat software is a tool. The user should understand basic underlying statistical theory in order to apply this technique properly to the valuation of real estate. There are many excellent books on the subject. You may find other books equally useful.
The Cartoon Guide to Statistics by Larry Gonick & Woollcott Smith (New York: HarperCollins Publishers, 1993. No joke, this is a great book for beginners!
Using Econometrics A Practical Guide 2nd Edition by A. H. Studenmund (New York: HarperCollins Publishers, 1992). This is truly a practical guide.
Practical Applications in Appraisal Valuation Modeling: Statistical Methods for Real Estate Practitioners by M. Steven Kane, Mark R. Linne, MAI, CRE, CAE, ASA, and Jeffrey A. Johnson, MAI (Chicago: Appraisal Institute, 2004). This book is specific to real estate valuation. www.appraisalinstitute.com
There are significant differences in analytical methods between Mass Appraisal techniques v. Automated Valuation Modeling v. Appraisal Valuation Modeling:
Uniform Standards of Professional Appraisal Practice (USPAP) published by the Appraisal Foundation, Washington, DC
USPAP Standard 6: Mass Appraisal, Development and Reporting
This is specifically designed for real estate tax assessment valuation for an entire, town, county, etc.
USPAP Advisory Opinion 18: Use of an Automated Valuation Model (AVM)
This is designed for “quick” value estimates that are computer driven and do not allow for appraiser intervention. These systems are “black boxes” whose specialized proprietary mathematical algorithms are not revealed to the user and hence of limited use to a real estate appraiser.
Appraisal Valuation Modeling - Sales Comparison Approach
The analytical methodology recommended for real estate appraisers is an appraisal valuation model that is different than an automated valuation model as described in the book: Practical Applications in Appraisal Valuation Modeling Statistical Methods for Real Estate Practitioners By M. Steven Kane, Mark R. Linne, MAI, CRE, ASA and Jeffrey A. Johnson, MAI Published by Appraisal Institute in 2004.
The following are excerpts from this book.
“The distinction between automated valuation models and appraisal valuation modeling goes beyond mere words. Historically AVM systems evolved from assessment valuation models, which value a large number of residential properties using statistical algorithms and mass appraisal theory.” (Page 4)
“Appraisal valuation modeling represents another evolutionary step in valuation technology and is significantly different than vender-supplied AVM systems. First, it was developed to enhance, rather than replace, traditional appraisal methods. Second, this system is built on appraisal theory, using statistical methods as necessary tools. Finally, AVM methods integrate completely with current appraisal methods and conform to USPAP requirements concerning disclosure and demonstrable market veracity.” (Page 5)
“The primary difference is the appraiser’s role. In vendor-supplied AVM systems, the statistical model drives the valuation process. With appraisal valuation modeling approach advocated in this book, the appraiser drives the system, using statistical modeling guided by appraisal theory. In addition, the appraiser is given the opportunity to constantly review and verify the valuation process, which is not possible with vendor products. (Page 7)
“Appraisal valuation modeling techniques augment traditional appraisal practice, which differentiates them from automated valuation model systems that literally replace the appraiser. The appraisers, therefore is maintained as the valuation expert. A new term, appraisal-centric valuation modeling, is perhaps the most descriptive and accurate explanation for the AVM initials used by practitioners.” (Page 5)
APPRAISAL INSTITUTE 2-DAY COURSE
Real Estate Finance, Statistics, and Valuation Modeling
This two-day course provides an introduction to statistics, real estate finance, and modeling with applications to residential and commercial real estate appraisal. On the first day, you will develop an understanding of basic statistics and statistical analysis and learn how those skills can be used in valuation and evaluation practice. On day two, you will gain an understanding of real estate finance markets, learn about credit conditions and their impact values on appraisal, and calculate and interpret fundamental numbers on loan payments and balances. Successful completion of the course and exam should satisfy most states’ education requirements in the content area identified as real estate finance, statistics, and valuation modeling.