Page 6 - Regression Guideline

""Regression"Process"""
The&SAVVI&AnalyDcs&Regression&Modeling&Approach&
" This"model"determines"how"well"the"remaining"property"characterisJcs"individually"and"as"a"set" predicts"variaJon"in"sales"price."Importantly,"the"model"examines"the"associaJons"among"the" property"characterisJcs"themselves."Only"those"characterisJcs"that"uniquely"predict"sales"price" are"retained"in"the"model."CharacterisJcs"that"overlap"substanJally"with"other"characterisJcs" already"included"in"the"model"(in"terms"of"predicJng"sales"price)"are"dropped."Only"the"best" predictor"set"is"retained.""
"
In"the"fi^h"and"final"step,"the"appraiser"selects"a"small"subset"(3)"of"properJes"comparable"to" the"property"being"appraised."A"map"displaying"properJes"by"their"proximity"to"the"appraised" property"assists"this"step."Using"the"predicted"sales"prices"for"these"properJes"and"the"valuaJon" for"each"property"characterisJc"in"the"final"mulJvariable"model,"a"final"sales"price"is"obtained"for" the"appraised"property.""
"
"
"
&
&
& Step&1:&Gathering&Data& "
GeHng&your&data&ready&for&analysis&
""""""""""
An"important"step"in"the"SAVVI"AnalyJcs"regression"process"is"gathering"data"on"a"set"of" properJes"that"will"be"used"to"esJmate"how"sales"prices"are"affected"by"property"characterisJcs." While"it"is"important"that"the"selected"properJes"are"similar"to"the"property"being"appraised"in" terms"of"characterisJcs"such"as"square"footage,"regression"analyses"require"sufficient"variaJon"to" adequately"and"accurately"esJmate"the"final"model."If"the"selected"properJes"reflect"only"a"very" narrow"range"of"prices"and"characterisJcs,"there"is"not"enough"variaJon"to"model"to"determine" how"a"property"characterisJc"affects"price"across"different"price"points."Conversely,"if"the"range" of"the"selected"properJes"is"too"broad,"there"is"a"higher"chance"that"properJes"too"dissimilar"to" the"property"being"appraised"will"be"included"in"the"modeling"resulJng"in"over"or"underesJmates" of"a"given"characterisJc’s"effect"on"sales"prices."The"SAVVI"AnalyJcs"approach"achieves"the"right" balance"between"comparability"and"range"by"selecJng"at"least"200"properJes"that"are"within" 30%"(plus"or"minus)"of"the"appraised"property’s"square"footage"and"within"20"years"(plus"or" minus)"of"the"appraised"property’s"age."Next,"a"Jme"adjustment"is"applied"to"the"sales"prices"of" the"properJes"to"make"them"maximally"comparable"to"the"Jme"of"the"current"appraisal.""
5"