Well I will be the first to take a stab at this and explain it in semi-layman type of terms. Its quite common for For Sale by Owners(they know everything) to think there is a direct relationship of Square footage to MV and/or Cost. They will often point out in their hood a neighbors house down the street recently sold for $100 per ft. The do this by dividing the sales price of the neighbors sale using the GLA. Example: Neighbor's house is 2,000 sf GLA sold for $200,000.= $100 per sf.. Meaning that his house is worth more than the neighbor because he has 2,300 sf. Hence his house is worth $230,000. WRONG!
Here is why its likely to be wrong. Lets remove actual age and physical condition for a moment. Lets say you have a 1200 sf 5 room 3 br, 2 bath ranch. This is a common house in the immediate hood of the subject. The home owner wants to add a family/den room on back of house. It is legally permissible. So the question is simple but more complex when you dig into this add-on improvement. How large should it be to maximize MV. Cost is just that cost. MV is another story. If he adds adds 12x20 room 240 sf) then the MV reaction is going to be most likely positive and a great idea. Most importantly the MV response will or should exceed cost considerably. 1 to 1/2 times comes to mind. Especially if the subject was the smallest in the Hood. Some home owners mistakenly think that if the above is true then a bonus room of 480 sft will equate to double the SF MV! We know from experience that this is not true. Its an over-improvement. The larger room has the same functional utility but it is excessive in relation to the total GLA. There is a point of diminishing returns.
I dont know if this makes any sense to you. I am winging it right now in my response. Bert the Regression Guy can demonstrate it with his model. Others will explain it similar to my way but more professionally(they will use bigger words).
Hope I was helpful.
Side Note: Google Analytics think they have me figured out! WRONG. They have only clues. Sometimes they get it right, most of the time they are wrong...really wrong!
i said this because Bert the Self Proclaimed Regression Expert on this forum is trying to convince all of us that his stuff is the end to end all. I don't agree with him on that, BUT I will say that what he says here is very useful. I see the advantages of what he is hawking. NP_MAI is very familiar and knowledgeable about Regression. His educational background is very high.
My thoughts are that Regression is very useful tool in RE Appraising. It will not replace the Boots on the ground Appraiser, IMHO.
The real threat to society is when 'Puters' are able to think! That takes imagination and I don't belive this is going to be possible for quite awhile.
Interesting comment by Bert! Read his post at this link! So i take back a little of what I said about him above.
https://appraisersforum.com/forums/...-survives-as-a-contest-judge-of-sorts.221482/
