- Joined
- Jun 27, 2017
- Professional Status
- Certified General Appraiser
- State
- California
Where do you get that adjustments in the sales grid have to be based on measurable or quantifiable attributes? The vast majority of appraisals are based to a large extent on subjective judgment for items such as view, condition, quality of construction, functional utility, and so on. But of course, it shouldn't be this way!!
HOWEVER, my method which I call the Residual Constraint Approach (RCA) lumps all variables without measures into one bag and uses the regression residual to in fact indirectly measure their value in a fairly accurate way. It simply subtracts the value of the measurable features, as obtained from MARS regression from the comparable sale price to get the residual - which by logic must be the value of everything else. It turns out that once you have the value of that "everything else" you can divvy it up any way you want without impacting the final adjusted sale price.
(Noticed in the first comment - I did make a correction to one of the equations.)
It is all mathematical and proven. There is the issue of Error, such as data errors. We can't do much about that, so the underlying assumption is that such errors, positive and negative, generally cancel out and don't have much, if any, impact on the final result.
There is an additional technique I haven't gotten around to documenting yet. -- That is the one single point where the appraiser using this method has to make a subjective estimate ---> the Subject residual has to be estimated because there is no sale price for the Subject. The way this is done is to rank all comparables (as fed to the MARS regression) based on their residual values - and by studying the ranking, place the subject within that ranking where it best fits. Noting of course that a ranking based on residuals will indeed be from the worst appeal to highest appeal homes: Homes that sell for more than expected are because the "Other" features have more market appeal and those with the lowest residuals have the "least" market appeal.
So you can quantify the value of the unmeasurable features - as a lump sum, - but that is all you need actually.
And, by the way, the Cost to Cure, definitely does not go in the Sales Grid. What goes in the Sales Grid is "Market Reaction". So, do it with RCA and you will have "measurable" and "market reaction." It is the ONLY way that it can be done.
None of the other appraisers on the face of the earth, as far as I know, can do this - except for me. If you can figure it out (it appears you are fairly bright and have the right mind set) -- good for you.