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Video: Real Estate Appraisal - Excel Regression Analysis Add-on Module (Beta)

The concept of regression might sound strange because the term is normally associated with movement backward, whereas in the world of statistics, regression is often used to predict the future. Simply put, regression is a statistical technique that finds a mathematical expression that best describes a set of data.

David Braun's excellent article Market Modeling and the Real Property Appraiser on a la mode's Labs site, part I of II, has garnered a lot of interest and feedback. Included with the article is a downloadable Excel utility (please right click and download to your computer to use) and an instruction sheet.

David has also produced a new three-part video tutorial that can be viewed right here. Each part is around 5-6 minutes long.

Part 1 of the introduction to Regression Analysis, starts off with MLS data exported to a standard Excel spreadsheet. Once the appraiser has the download, he or she, would open up David's application to import the data into a "Raw Sales" workbook and then "Scrub" the data in preparation for analysis.

The appraiser can then designate which sales they want to work with and which columns of property characteristics. Once that is done, you load the sheet for analysis and manually clean up any blank fields. The model will help identify them if any are missed.

Part 2 will pickup with running the model.

Part 2 of the introduction to Regression Analysis Add-on Module. We're ready to run the application which will generate a regression model which will be applied to the sales and subject property. The application will create a chart with actual sales prices and predicted values. The appraiser can then remove outliers (bad data - large value differences) to improve the results.

Once the appraiser has at least 15 to 30 sales and the model predicted values in the +/-10% range we're ready to move on. By the end of this section, David has 42 sales, and a 94% "Confidence" score, and a 97 R-Squared rating.

In Part 3 of this Introduction to Regression Analysis Add-on Module we'll be able to look at the actual output of this model's predictions.

The output ends up generating a table of adjustments to each comparable.

We can then review the adjustment levels to see what is reasonable.

You'll see that the appraiser can then delete columns of data an re-run the analysis if he finds any adjustments that do not appear reasonable and adjust the sales if necessary.

From my personal experience, this will force the adjustments into another area which then proxies for the original characteristic.

The application will then generate a "Valuation By Multi-Linear Regression" report.

The appraiser can then modify the table with his knowledge of the market.

Once that's done, the regression report can be saved to a work-file or included as part of the appraisal report.

Would YOU like to try this out? You can!

If you have Excel loaded on your computer you can download the application and the user instructions.

It is set to run until the end of this year. It is presented in a module that is an addition to an appraisal and is not intended to be a stand alone appraisal.
Have you used the utility? Do you have an ideas, feedback or comments? Leave them here or on the a la mode labs blog

Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoopblog and the WinTOTAL Users Group an email forum for appraisers.

Posted by Brian Davis on 09/16/2007 02:45 PM Comments (7) adjustments, market analysis

Post is included in group: Appraisers

7 Comments on Video: Real Estate Appraisal - Excel Regression Analysis Add-on Module (Beta)

This is a great concept and a wonderful use of video as a demonstration. I think if you typed out the same information with screen shots it would not have been as useful.

09/16/2007 03:23 PM by Sam Miller (RE/MAX Stars Realty)

Well, it's official... I'm just going to bookmark your 'Brian Davis' page for my reference materials. You almost made me want to take a refresher Excel class... almost :-)

09/17/2007 12:25 PM by Sara Goodwin - Portland, Oregon Appraiser (Ashcroft & Associates)

Brian,
This is the type of application of stats that appraisers should be looking at. The videos are great, but the application that is downloaded does not appear to be the same as in the videos? (No "Scrub Data" button). I tried to play with it but could not get the import button to pull the data either? Maybe an updated version will be available at alm labs soon? Looks to be a great tool!

09/18/2007 11:49 AM by Robert Elfand, MRA, RAA (Double Tree Appraisals)

Brian,
Thank you and this is great! I have seen something like this done before but was kind of tricky... that and some of our MLS systems are a little off in exporting data. The later is something that we have been working with them on because their system is not always or al the way set up for appraiser data use.
Anyway I want to tell you that I will be letting the appraisers I know to check this out and your post! I really like the video use and the fact that they can try it out to see how it works.
This is what appraisers need in the business. Thank you for your work and help.

09/19/2007 11:17 PM by Shane Leady (Apella Real Estate Business Solutions)

Sara, Shane, Robert -
THANKS for the feedback! I'll pass this along to the Labs people at a la mode! Yes, this IS a work-in-progress. It's sort of a "Concept Car" if you will. It's intended to explore the sorts of things that CAN be done and then look for direction.
So often I read of GREAT IDEAS . . . but then no one picks up the ball and runs with it. If you're like me, it's just nice to SEE something in ACTION.
There was a quick mention in the video about working with the a la mode WinTOTAL (appraisal software) Comparable Database data rather than MLS data. Obviously, if that was possible, the two applications could be tightly integrated and there would be far less need for importing, exporting, and scrubbing of data.
It would work more transparently. Sort of like we run reports and graphs from the MLS now . . .but with the ability to do more advanced analysis.
As appraisers know . . .one of the KEY pressures that we're under is TIME! We need a way to do the types of analysis that our clients are demanding, but do it QUICKLY. If the "process" is going to take an hour or two to complete . . .guess what! It's not going to happen!
Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 23 years of appraisal experience in Central, IL and hosts the Appraisal Scoopblog and the WinTOTAL Users Group an email forum for appraisers.

09/20/2007 06:54 AM by Brian Davis (Brian J. Davis & Associates)

This is the type of application of stats that appraisers should be looking at. The videos are great, but the application that is downloaded does not appear to be the same as in the videos? (No "Scrub Data" button). I tried to play with it but could not get the import button to pull the data either? Maybe an updated version will be available at alm labs soon? Looks to be a great tool! This in my same reaction.

01/31/2008 01:49 PM by Gregory Beck

Brian,
You are my hero! I've learned so much by reading your posts and watching the videos you include in them. I have Appraisal Scoop as one of my home page tabs, my email and MSN homepage are the other two that open with your site. Thank you for this post. Is there any way to save these videos to add to my growing appraisal library collection?

02/01/2008 09:00 AM by Kenneth Miller, NW Ohio FHA Appraiser (Miller Appraisals)

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