Mass appraisal methods : an international perspective for property valuers

360 Pages·2008·2.9 MB·English

by  Tom Kauko

Mass Appraisal Methods

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Mass Appraisal Methods
An international perspective for property valuers
Edited by
Tom Kauko
DepartmentofGeography
NorwegianUniversityofScienceandTechnology(NTNU)
Trondheim
Norway
and
OTB,DelftUniversityofTechnology
Delft
TheNetherlands
Maurizio d’Amato
ArchitectureandPlanningDepartment
TechnicalUniversityPolitecnicodiBari
Bari
Italy

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Thiseditionfirstpublished2008
©2008BlackwellPublishingLtd
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LibraryofCongressCataloging-in-PublicationData
Massappraisalmethods:aninternationalperspectiveforpropertyvaluers/edited
byTomKauko,Mauriziod’Amato.
p.cm.—(Realestateissues)
Includesbibliographicalreferencesandindex.
ISBN-13:978-1-4051-8097-9(hbk.:alk.paper)
ISBN-10:1-4051-8097-8(hbk.:alk.paper)
1.Realproperty—Valuation.I.Kauko,Tom.II.d’Amato,Maurizio.
HD1387.M3692008
(cid:1)
333.332—dc22
2008006134
AcataloguerecordforthisbookisavailablefromtheBritishLibrary.
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1 2008
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Contents
Contributors ix
Foreword xv
Preface xxi
Abbreviations xxiii
1 Introduction:SuitabilityIssuesinMassAppraisalMethodology 1
TomKaukoandMauriziod’Amato
PARTI MASSAPPRAISALPRACTICEAND
RECOMMENDATIONS 25
2 DataIssuesInvolvedwiththeApplicationofAutomated
ValuationMethods:ACaseStudy 27
JohnF.Thompson,Jr
3 TheModifiedComparableSalesMethodastheBasisforaProperty
TaxValuationsSystemanditsRelationshipandComparisonto
SpatiallyAutoregressiveValuationModels 49
RichardA.BorstandWilliamJ.McCluskey
4 AutomatedValuationintheDutchHousingMarket:The
Web-Application‘MarktPositie’UsedbyNVM-Realtors 70
DreeOp’tVeld,EmmaBijlsmaandPaulienvandeHoef
5 UsingFuzzyNumbersinMassAppraisal:TheCaseofthe
BelarusianPropertyMarket 91
Mauriziod’AmatoandNikolaiSiniak
PARTII CURRENTADVANCEDMETHODS 109
6 MassAppraisal,HedonicPriceModellingandUrban

Externalities:UnderstandingPropertyValueShapingProcesses 111
FrançoisDesRosiersandMariusThériault
7 ResidualsAnalysisforConstructing‘MoreReal’PropertyValue 148
MałgorzataRenigier
8 TheHierarchicalTrendModel 164
MarcK.Francke
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viii Contents
PARTIII EMERGINGMETHODS 181
9 DevelopingMassAppraisalModelswithFuzzySystems 183
MarcoAurélioStumpfGonzález
10 UtterlyUnorthodoxModellingforthePurposesofMass
Appraisal:AnApproachBasedonPatternsandJudgments 203
TomKauko
11 RoughSetTheoryasPropertyValuationMethodology:
TheWholeStory 220
Mauriziod’Amato
PARTIV COMPARISONOFTOOLSUSINGASETOF
SPECIFICCRITERIA 259
12 TechnicalComparisonoftheMethodsIncludingFormalTesting
ofAccuracyandOtherModellingPerformanceUsingOwnData
SetsandMultipleRegressionAnalysis 261
RichardA.Borst,FrançoisDesRosiers,MałgorzataRenigier,
MarcoAurélioStumpfGonzález,TomKaukoandMaurizio
d’Amato
13 PropertyMarketClassificationandMassAppraisalMethodology 280
Mauriziod’AmatoandTomKauko
PARTV CONCLUSION 305
14 AutomatedValuationMethods,EmpiricalModellingofValue,
andSystemsforMarketAnalysis 307
TomKauko
Glossary 321
Index 325

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Contributors
Emma Bijlsma has a longstanding career as a statistician and developer of
market information and decision support systems with both TNO (Dutch
National Organisation for Applied Scientific Research) and Momentum
Technologies. She is one of the founders of that company. Emma was
responsible for much of, or more accurately, the heart of, the estimation
methodology behind ‘MarktPositie’, the web-based valuation tool applied
bymembersofNVM(NetherlandsOrganisationofRealEstateAgents).
RichardA.Borsthasbeenengagedinmanagingthedesign,developmentand
implementationofcomputer-basedrealpropertyinformationsystemssince
1973.HewaspresidentofNorthAmerica’slargestmassappraisalfirmwhile
at the same time maintaining his contributions to the technical aspects of
massappraisalsystems.Histechnicalbackgroundisevidencedinanumber
of published articles and conference presentations. He introduced artificial
neural networks to the assessment community in 1990. He was appointed
toathree-yeartermin1997asaVisitingResearchFellowattheUniversity
ofUlster,Belfast,NorthernIreland.Duringthistenurehecollaboratedwith
members of the faculty at the University performing research in the fields
of valuation modelling and the application of location effects in the model
structuring and calibration process. He obtained a Doctor of Technology
from the University of Ulster, Northern Ireland, a Master of Science in
Industrial Engineering from the State University of New York at Buffalo
and a Bachelor of Engineering Science, with honours, from the Cleveland
StateUniversity.
Maurizio d’Amato is Associate Professor at the 1st Faculty of Engineer-
ing, Technical University Politecnico di Bari, Italy, where he teaches real
estatevaluation.HecompletedhisundergraduateworkinEconomicsatthe
UniversityofBariandworkedforseveralbanksinrealestatefinancebefore
entering the doctoral program in Planning, specializing in valuation meth-
ods, at the Politecnico di Bari. After completing this program, he served as
contractprof essorinRealEstateValuationforthreeyears.Duringthistime
he received research grants from the Italian Council of Research (CNR) for
projectsundertakenattheUniversityofFloridain1997,1998and1999and
attheUniversityofAlicanteSpainin2000.Hehasbeenscientificdirectorof
theRealEstateCenterofItalianAssociationofRealEstateCounselor(AICI).
HeisscientificdirectorandfounderofRealEstateMarketObservatoryofthe
Technical University Politecnico di Bari. He has been a Member of Expert
Committee of Tecnoborsa. He was appointed Fellow Member of the Royal
InstitutionofCharteredSurveyorsin2004.
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x Contributors
François Des Rosiers is an economist and urban planner and holds a PhD
degree in Urban and Regional Planning Studies from the London School
of Economics, UK (1984). Since 1976, he has been teaching Urban and
Real Estate Management at the Faculty of Business Administration, Laval
University,whereheisafullprofessorandcurrentlyinchargeoftheUrban
&RealEstateManagementProgram.Inadditiontohisteachingandresearch
tasks, François Des Rosiers has served over the past twenty years as a con-
sultantandadviserforseveralpublic,semi-public,institutionalandprivate
bodiesandorganizations, bothinQuebec, Canadaandabroadandhasbeen
involved in various policy issues through numerous committees, commis-
sions, panels, boards, etc., at the national, provincial and local levels. His
main research area deals with hedonic price modelling and the measure-
ment of urban externalities. Professor Des Rosiers’s academic realizations
haveearnedhimseveralawardsandmanuscriptprizes.InJuly2007,hewas
elected Fellow of the Academy for Social Sciences of the Royal Society of
Canada.
Marc K. Francke graduated in 1994 in Econometrics at the Vrije Univer-
siteitAmsterdam.MarkFranckeworkedattheAmsterdamTaxAuthorities
office during 1994–2000, where he developed models for mass appraisal
of real estate. In 2001 he was co-founder of OrtaX, a company that spe-
cialized in mass appraisal for local government and housing corporations.
In 2006 he defended his PhD dissertation entitled ‘Marginal Likelihood
in State-space Models, Theory and Applications’. In 2006 he became a
part-time Assistant Professor in the Econometrics Department at the Vrije
Universiteit Amsterdam. He has published in the Journal of Property Tax
Assessment and Administration, the Journal of Business and Economic
Statistics,theJournalofRealEstateFinanceandEconomicsandtheJournal
ofEconometrics.
Marco Aurélio Stumpf González is Professor and Researcher at Civil
Engineering Post Graduate Programme at Universidade do Vale do Rio dos
Sinos(UNISINOS),wherehehasbeenteachingRealEstateValuationsince
1996.Hisresearchinterestscoverhousing,sustainablebuildings,economics
of building renewal, market analysis, taxation of real estate, valuation and
financial analysis of real estate, and alternative property valuation tech-

niques(especiallyfuzzyrulesandartificialneuralnetworksmodels).In1993
he obtained MSc in Engineering at Universidade Federal do Rio Grande do
Sul(UFRGS),withmajorinRealEstateValuation.In1998hebecameaPhD
candidate at UFRGS (Civil Engineering), and completed his dissertation in
2002.
Tom Kauko has been Associate Professor in Urban Geography at the Nor-
wegian University of Science and Technology (NTNU) since 2006. His
research interests cover housing market analysis; evaluation of planning
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