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Estimating Property Values by Replication: An Alternative to the Traditional Grid and Regression Methods

Author

Listed:
  • Tsong-Yue Lai

    () (California State University Fullerton P.O. Box 6848, Fullerton, CA 92834)

  • Kerry Vandell

    () (University of California, Irvine The Paul Merage School of Business, Irvine, CA 92697)

  • Ko Wang

    () (Baruch College 137 E. 22nd Street, New York, NY 10010)

  • Gerd Welke

    () (Baruch College 137 E. 22nd Street, New York, NY 10010)

Abstract

This paper proposes and develops a replication method for estimating property values, in which optimal weights of comparable property attributes that best duplicate the subject property are determined. In a setting where the number of comparables is large compared to the number of attributes, replication weakly outperforms traditional general least squares regression by making use of potential correlations in the error structure. A similar result obtains in comparison to the grid method, which may suffer from subjective price adjustment factors. The replication method suggests using a large sample regression analysis to obtain the functional form of the error variance-covariance, and then replicating the subject with a smaller, attribute-close set of comparable properties.

Suggested Citation

  • Tsong-Yue Lai & Kerry Vandell & Ko Wang & Gerd Welke, 2008. "Estimating Property Values by Replication: An Alternative to the Traditional Grid and Regression Methods," Journal of Real Estate Research, American Real Estate Society, vol. 30(4), pages 441-460.
  • Handle: RePEc:jre:issued:v:30:n:4:2008:p:441-460
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    Cited by:

    1. Sofia Dermisi & John F. McDonald, 2010. "Selling Prices/sq.ft. of Office Buildings in Downtown Chicago – How Much Is It Worth to Be an Old But Class A Building?," Journal of Real Estate Research, American Real Estate Society, vol. 32(1), pages 1-22.
    2. Sam K. Hui & Alvin Cheung & Jimmy Pang, 2010. "A Hierarchical Bayesian Approach for Residential Property Valuation:Application to Hong Kong Housing Market," International Real Estate Review, Asian Real Estate Society, vol. 13(1), pages 1-29.
    3. Gaetano Lisi, 2016. "General equivalency between the discount rate and the going-in & going-out capitalization rates," Economics and Business Letters, Oviedo University Press, vol. 5(2), pages 58-64.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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