The problem we address is the development and support of adjustments required to complete the Sales Comparison Approach section of the Uniform Residential Appraisal Report Form 1004.
The textbook approach has been to isolate matched pairs that show the effect on price of a difference between otherwise equal properties. More recently, statistical analysis is applied to a population of relevant properties.
After 17 years and over 5,000 appraisals, I have come to understand the limitations of these methods. Matched pairs are seldom available. Statistical analysis is credible for large sample sizes. But sample size and sample fit pull in opposite directions.
Our search for a method that is predictive and repeatable has lead us to the Depreciated Replacement Cost method. We have refined this approach to make it fast and convenient. For adjustment categories that have no cost basis, we have developed Peer Consensus Adjustments. Rather than sampling sales transactions, we sample appraisers. This is the approach taken by Fannie Mae with UAD and Collateral Underwriter, so we think it has promise as we gain participation and build our database.
We encourage you to read more about The Sample Problem, Remaining Economic Life and Peer Consensus. Then gives us a try at Subscribe. There is a Free Trial option, a $10/month subscription and a $100 annual subscription.