Page 27 - Regression Guideline

Underwriters"quesJon"and"response" con’t..."
$" Q.&&If&there&is&no&specific&adjustment&developed&for&the&garage&space,&why&is&it&accounted& for,&rather&than&excluded,&from&the&adjustments&found&to&be&significant?&Fannie&Mae&does& not&allow&adjustments&that&encompass&mulAple&features/aGributes.&
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A. This"is"a"quesJon"about"the"point"that"when"a"factor"drops"out"of"the"model,"it"is"either"
unrelated"to"sales"price"or"the"variaJon"in"sales"price"accounted"for"by"that"factor"are" accounted"for"by"one"or"more"other"factors"that"are"significant."In"effect,"the"factors"in" the"model"do"account"for"variaJon"in"sales"price"owing"to"mulJple"features"(those"with" which"they"overlap)."Whether"this"is"a"violaJon"of"the"Fannie"Mae"rule,"I"can't"say"but" the"quesJoner"is"accurate"in"their"understanding"of"how"the"adjustments"work.""
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Q.&&The®ression&analysis&reported&a&bathroom&adjustment&of&$46,813.&&How&can&that&be& credible?&"
$"
A. The"adjustment"for"any"one"factor"is"based"on"the"other"factors"in"the"equaJon"and"
someJmes,"one"factor"is"associated"with"variaJon"in"sales"price"that"is"asributable"to" other"factors."It"could"be"that"when"there"is"a"bathroom,"there"are"o^en"other"desirable" asributes"in"the"modeled"properJes"associated"with"bathrooms."The"adjustment"reflects" not"only"the"influence"of"bathroom"on"sales"price"but"also"the"fact"that"this"factor"is" o^en"associated"with"other"desirable"characterisJcs""that"increase"property"value.""
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Q.&&The®ression&analysis&reported&a&Main&Square&Feet&&adjustment&of&$209&per&sq.S..&& How&can&that&be&credible&when&the&replacement&Cost/sqS&is&only&$183?"
$"
A. The"two"approaches"are"quite"dissimilar."The"cost"approach"uses"a"naJonal"database"
which"then"tries"to"compensate"for"differences"in"locality"and"does"not"include"equity"in" the"property.""
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