Page 17 - Regression Guideline
P. 17
Date: 04/22/2015 Submitted by: Test Appraiser
Savvi"Sample"Report"
5419 W Prentice Cir, Littleton, CO 80123
123"Main"St."anywhere"US."
The Hedonic Regression Approach to Value, when used in conjunction with the Sales Comparison approach, supports the Final Value Estimate as well as substantiates critical and statistically significant component adjustments. The basic premise of the hedonic pricing method is that the price of a marketed good is related to its characteristics.
Since Hedonic Regression adjustments analyze and consider all significant property characteristics that contribute to a property’s value there are oftentimes instances wherein several characteristics overlap with each other (called “multicollinearity” in statistical terms). This means the overlapping characteristics do not uniquely contribute to the estimation of a final price.
To adjust for the overlap, one or more of the overlapping characteristics is removed from the final regression model. This does not mean its effects on the property’s price are not being considered. Its effect is included within one or more of the variables that remain in the model.
1 16"
