Page 4 - Regression Guideline

How"Regression"Works""
Independent"
Bedroom,"Year"constricJon,"
As"a"real"estate"appraiser,"you"are" interested"in"determining"how"a"set"of" characterisJcs"about"a"given"property"such" as"number"of"baths&and&bedrooms,&total& square&feet&etc.,"affects"the"sale&price&of"the" property.""
Although"you"might"not"have"thought"of" them"in"this"way,"in"staJsJcal"terms,"the" property"characterisJcs"that"affect"the"sale" price"(up"or"down)"are"independent"or" predictor&variables"because"they"(help"you" the"appraiser)"esJmate"or"predict"what"the" property"is"worth."StaJsJcally"speaking,"the" esJmated"sale"price"is"called"the"dependent& variable"because"the"esJmated"price" depends"on"the"set"of"property" characterisJc"predictors"that"were" considered"when"arriving"at"an"appraised" value.""
Variables""" Bath,"Garage,"SqFt,""Lot"size""
Etc......."
Influence" "
In"The""
Dependent" Variable:&Sold&Price&&&
The"staJsJcal"tool"used"to"esJmate"a"sale"price"is"called"regression"analysis."Regression" techniques"have"long"been"central"to"the"field"of"economic"staJsJcs"(“econometrics”)." Increasingly,"they"have"become"important"to"appraisers"in"their"data"analysis."In"an"appraisal" regression"model,"the"dependent"variable"sale"price"is"“regressed”"on"a"selected"set"of"property" characterisJcs"to"determine"how"much"of"the"variaJon"in"sale"prices"of"geographically" comparable"properJes"is"due"to"variaJon"in"the"predictor"characterisJcs"included"in"the" regression"model."The"higher"the"percentage"of"variaJon"in"the"sale"prices"of"like"properJes"that" can"be"“explained”"by"the"predicJve"set"of"property"characterisJcs,"the"more"accurate"your" predicJon"of"the"property"value."A"thorough"regression"analysis"will"therefore"improve"your" ability"to"accurately"appraise"property"values"beyond"what"can"be"done"by"“guessJmaJng”"or" looking"at"only"one"or"a"few"property"characterisJcs.""
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