Page 8 - Regression Guideline

Gecng"your"data"ready"for" analysis"
What&is&a&standard&deviaDon?&(conDnued)&
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The"new"average"sales"price"of"the"remaining"properJes"now"drops"and"is"closer"to"$500,000," reflecJng"a"truer,"less"biased"esJmate"of"the"sales"prices"of"properJes"comparable"to"the"one" being"appraised.""
" Note"that"in"this"example,"the"staJsJcal"outliers"had"extremely"high"sales"prices"relaJve"to"the" average."It"is"also"possible"to"have"outliers"in"the"opposite"direcJon"as"when"there"are" properJes"in"the"selected"sample"that"have"very"low"sales"prices,"and"which"consequently"bias" the"sample"mean"downwards."Whether"extremely"high"or"low"in"terms"of"relaJve"sales"prices," it"is"important"to"idenJfy"staJsJcal"outliers"to"obtain"a"mean"sales"price"that"is"a"less"biased" representaJon"of"the"sales"price"of"the"majority"of"properJes"comparable"to"the"one"being" appraised."
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This"is"exactly"the"process"that"SAVVI"AnalyJcs"uses"to"select"a"sample"of"comparable" properJes"and"to"idenJfy"and"eliminate"staJsJcal"outliers"with"extremely"high"or"low"sales" prices"relaJve"to"average"sales"price"of"the"other"selected"properJes."During"the"sample" selecJon"phase"of"the"comparaJve"analysis"done"by"SAVVI"AnalyJcs,"a"sample"of"at"least"200" geographically"similar"properJes"are"selected"from"the"MLS"or"userPsupplied"database."A"mean" score"is"calculated"for"the"sample"as"well"as"a"standard"deviaJon"score"for"each"property"in"the" iniJal"sample."ProperJes"with"sales"prices"of"greater"than"or"less"than"2"standard"deviaJons" above"or"below"the"mean"sale"price"for"the"sample"are"excluded"from"the"bivariate"and" mulJvariable"analyses"because"their"sales"prices"are"not"representaJve"of"the"large"majority"of" properJes.""
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The"removal"of"these"properJes"prior"to"running"the"regression"insures"that"properJes"with" extremely"high"or"low"sales"prices"relaJve"to"the"rest"of"the"sample"do"not"unduly"influence"the" final"mulJvariable"regression"esJmates"of"how"much"to"adjust"the"sales"price"of"the"property" being"appraised"using"the"smaller"sample"or"appraiser"selected"comparables""
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