We often appraise new or nearly new commercial buildings. In many of these cases, the cost approach is the most relevant method and entrepreneurial incentive is an important element of this technique. But what is entrepreneurial incentive? Basically, it's the incentive an investor has for coordinating the construction of a new project. The … [Read more...]
Big Data, Statistics, and the Appraiser
Big Data, Statistics, and the Appraiser One of the most popular articles on my blog provides instructions to perform simple linear regression in Excel in order to justify adjustments to comparable sales. Without question, big data is here and there is a hunger in the appraisal world to learn more about statistics. Though I only accept commercial … [Read more...]
Allocating Value: Tangible vs. Intangible Assets
The subject of a recent appraisal required me to form an opinion of the market value of the going concern of a business enterprise. As it turns out, the value of the business was significantly higher than the value of the underlying real estate asset. Most of the difference was attributable to intangible assets of the business enterprise (supplier … [Read more...]
The Limitations of Regression Analysis in Appraisal Work
Real Estate Appraisals: Art or Science? I sometimes jokingly remark to my wife, Erin, that "appraising is much like building a house or making sausage...you don't always want to see how they're made." Like the imperfections hidden behind painted drywall in the building process or the spooning cuts of Italian sausage neatly presented at the meat … [Read more...]
Adjustments to Comparable Sales Using Simple Linear Regression
In a previous post I promised to provide a more in-depth explanation of using simple linear regression to adjust comparable sales. Today I will fulfill that promise. To do so, I will use an example of a size adjustment from a recent commercial appraisal I performed on an office building in Louisville, Kentucky. Appraisers have known for years … [Read more...]
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