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An Empirical Analysis of Hedonic Regression and Grid‐Adjustment Techniques in Real Estate Appraisal

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  • Han‐Bin Kang
  • Alan K. Reichert

Abstract

Multiple regression analysis has become increasingly popular when appraising residential properties for tax purposes. Alternatively, most fee appraisers and real estate brokers use the traditional sales comparison approach. This study combines the two techniques and uses multiple regression to generate the adjustment coefficients used in the grid adjustment method. The study compares the combined grid‐regression method with ordinary regression and defines the market conditions under which each method is likely to be more effective. The grid‐regression method is found to be more accurate for relatively homogeneous housing markets, and the multiplicative percentage adjustment method (MPAM) the preferred approach.

Suggested Citation

  • Han‐Bin Kang & Alan K. Reichert, 1991. "An Empirical Analysis of Hedonic Regression and Grid‐Adjustment Techniques in Real Estate Appraisal," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(1), pages 70-91, March.
    • Handle: RePEc:bla:reesec:v:19:y:1991:i:1:p:70-91
    DOI: 10.1111/1540-6229.00541
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    Cited by:

    1. Joseph B. Lipscomb & J. Brian Gray, 1995. "A Connection between Paired Data Analysis and Regression Analysis for Estimating Sales Adjustments," Journal of Real Estate Research, American Real Estate Society, vol. 10(2), pages 175-184.
    2. Maurizio d’Amato, 2007. "Comparing Rough Set Theory with Multiple Regression Analysis as Automated Valuation Methodologies," International Real Estate Review, Global Social Science Institute, vol. 10(2), pages 42-65.
    3. James A. Bryant & Donald R. Epley, 1998. "Cancerphobia: Electromagnetic Fields and Their Impact on Residential Loan Values," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 115-129.
    4. Antipov, Evgeny & Pokryshevskaya, Elena, 2010. "Mass appraisal of residential apartments: An application of Random forest for valuation and a CART-based approach for model diagnostics," MPRA Paper 27645, University Library of Munich, Germany.
    5. Michel Glower & Donald R. Haurin & Patric H. Hendershott, 1995. "Selling Price and Selling Time: The Impact of Seller Motivation," NBER Working Papers 5071, National Bureau of Economic Research, Inc.
    6. R. Kelley Pace, 1998. "Total Grid Estimation," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 101-114.
    7. George H. Lentz & Ko Wang, 1998. "Residential Appraisal and the Lending Process: A Survey of Issues," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 11-40.
    8. Löw, Franziska & Lüth, Hendrik, 2021. "Quality Signals on Airbnb: A Hedonic Regression Approach," Working Paper 189/2021, Helmut Schmidt University, Hamburg.
    9. Copiello Sergio & Cecchinato Filippo & Haj Salih Mohammed, 2021. "The Effect of Hybrid Attributes on Property Prices," Real Estate Management and Valuation, Sciendo, vol. 29(4), pages 36-52, December.
    10. Elena B. Pokryshevskaya & Evgeny A. Antipov, 2011. "Applying a CART-based approach for the diagnostics of mass appraisal models," Economics Bulletin, AccessEcon, vol. 31(3), pages 2521-2528.
    11. José António C. Santos & Manuel Á. Fernández-Gámez & Miguel Ángel Solano-Sánchez & Francisco José Rey-Carmona & Lorena Caridad y López del Rio, 2020. "Valuation Models for Holiday Rentals’ Daily Rates: Price Composition Based on Booking.com," Sustainability, MDPI, vol. 13(1), pages 1-15, December.
    12. Adam Nowak & Patrick Smith, 2015. "Textual Analysis in Real Estate," Working Papers 15-34, Department of Economics, West Virginia University.

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