Austin
Elite Member
- Joined
- Jan 16, 2002
- Professional Status
- Certified General Appraiser
- State
- Virginia
Steven:
As to the 4-3-2-1 rule, the first time I heard that rule was about 30 years ago. I read an appraisal report, at least it was considered one by the standards of the times, that quoted some authoritive source that explained the 4-3-2-1 rule and the corner lot rule that said something like corner lots have been found to sell for 25% more than inside lots. Seems like I saw the same thing in about the 7 or 8th edition of The Appraisal of Real Estate by the AIREA. In my experience I have never seen any market support for any rule, it is always frontage and site area as the critical factors. There are no rules as I know of except to find the equation that explains the correlation between sale price and variables that determine price.
I don’t now what you mean by your statement that we can’t measure size and shape at the same time. I said nothing about shape, I said frontage vs. site area. Shape could be a third variable and if the site were reggular shaped using the depth would yield the same result as site area (an example of measuring the same thing twice) but I don’t remember seeing it indicated by any data set. Frontage and depth does have some interesting aspects though because a square is sort of a form of least sum of the squares as to length of perimeter and site area. A square maximizes the area and minimizes the perimeter and the regression maximizes the price when the frontage and site area are in the proper balance but I don’t see what you are getting at with that point. By the way, I do not remember ever seeing any corner influence. Probably another myth because it seems like it would make sense like the 4-3-2-1 rule makes sense, unfortunately the market players around here never heard of the rules.
Ed: Forget those rules because they are wrong in principle. They were a crutch like matched pairs for example until a better method came along. I don’t have my copy of the Appraisal of Real Estate here right now, but in the sales comparison approach chapter their example, if I remember correctly, is an example using a commercial lot. I worked the problem with regression and the example solution in the book is not wrong but far less than the best solution. The unusual thing about using regression is that it measures things that you can't percieve. An example is the local residential market being divided into historical eras. I figured that out by deductive reasoning. I accounted for all of the physical factors and it still would not work, so I took another look at the data to see what was driving the price differences. When I looked at the pictures of the houses I could see it. Then if you want to you can enter that into the regression and use a broader data base if you are short on sales. Same with one and two story houses, just don't enter a one story in the regression as a 1 and a two story as a 2. Enter one as a 0 and two story as a 1. Same goes fro waterfront property. But that is old hat now as I have invented a new method that yields the same results, is much simplier, and looks like a conventional marketing grid but the key is the correct sequence of adjustments done properly.
As to the 4-3-2-1 rule, the first time I heard that rule was about 30 years ago. I read an appraisal report, at least it was considered one by the standards of the times, that quoted some authoritive source that explained the 4-3-2-1 rule and the corner lot rule that said something like corner lots have been found to sell for 25% more than inside lots. Seems like I saw the same thing in about the 7 or 8th edition of The Appraisal of Real Estate by the AIREA. In my experience I have never seen any market support for any rule, it is always frontage and site area as the critical factors. There are no rules as I know of except to find the equation that explains the correlation between sale price and variables that determine price.
I don’t now what you mean by your statement that we can’t measure size and shape at the same time. I said nothing about shape, I said frontage vs. site area. Shape could be a third variable and if the site were reggular shaped using the depth would yield the same result as site area (an example of measuring the same thing twice) but I don’t remember seeing it indicated by any data set. Frontage and depth does have some interesting aspects though because a square is sort of a form of least sum of the squares as to length of perimeter and site area. A square maximizes the area and minimizes the perimeter and the regression maximizes the price when the frontage and site area are in the proper balance but I don’t see what you are getting at with that point. By the way, I do not remember ever seeing any corner influence. Probably another myth because it seems like it would make sense like the 4-3-2-1 rule makes sense, unfortunately the market players around here never heard of the rules.
Ed: Forget those rules because they are wrong in principle. They were a crutch like matched pairs for example until a better method came along. I don’t have my copy of the Appraisal of Real Estate here right now, but in the sales comparison approach chapter their example, if I remember correctly, is an example using a commercial lot. I worked the problem with regression and the example solution in the book is not wrong but far less than the best solution. The unusual thing about using regression is that it measures things that you can't percieve. An example is the local residential market being divided into historical eras. I figured that out by deductive reasoning. I accounted for all of the physical factors and it still would not work, so I took another look at the data to see what was driving the price differences. When I looked at the pictures of the houses I could see it. Then if you want to you can enter that into the regression and use a broader data base if you are short on sales. Same with one and two story houses, just don't enter a one story in the regression as a 1 and a two story as a 2. Enter one as a 0 and two story as a 1. Same goes fro waterfront property. But that is old hat now as I have invented a new method that yields the same results, is much simplier, and looks like a conventional marketing grid but the key is the correct sequence of adjustments done properly.
