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Quantifying Estimation Bias in Residential Appraisal

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Abstract

The purpose of this study was to empirically test the ability of residential appraisers to estimate market value of houses. Using a sample of over 500 appraisals made for corporate relocation firms, the appraisal estimates of market value were compared with the actual price that the house sold for subsequently. The results indicate that current appraisal methods produce unbiased estimates of market value. Additional empirical results are presented that show that seasonal factors and regional economic conditions significantly explain variation in appraisal error.

Suggested Citation

  • Mark G. Dotzour, 1988. "Quantifying Estimation Bias in Residential Appraisal," Journal of Real Estate Research, American Real Estate Society, vol. 3(3), pages 1-11.
  • Handle: RePEc:jre:issued:v:3:n:3:1988:p:1-11
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    File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol03n03/v03p001.pdf
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    References listed on IDEAS

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    1. Richard J. Buttimer, Jr. & Ronald C. Rutherford & Ron Witten, 1997. "Industrial Warehouse Rent Determinants in the Dallas/Fort Worth Area," Journal of Real Estate Research, American Real Estate Society, pages 47-56.
    2. William L. Attebery & Ronald C. Rutherford & Mark E. Eakin, 1993. "Industrial Real Estate Prices and Market Efficiency," Journal of Real Estate Research, American Real Estate Society, pages 377-386.
    3. Larry J. Lockwood & Ronald C. Rutherford, 1996. "Determinants of Industrial Property Value," Real Estate Economics, American Real Estate and Urban Economics Association, pages 257-272.
    4. Brent W. Ambrose, 1990. "An Analysis of the Factors Affecting Light Industrial Property Valuation," Journal of Real Estate Research, American Real Estate Society, pages 355-370.
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    Cited by:

    1. Charles J. Delaney & Allen J. Seward, 1991. "An Analysis of the Relationship between Price and Variance for Homogeneous Housing Stock," Journal of Real Estate Research, American Real Estate Society, pages 99-112.
    2. 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, pages 115-129.
    3. R. Kelley Pace, 1998. "Total Grid Estimation," Journal of Real Estate Research, American Real Estate Society, pages 101-114.
    4. 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, pages 11-40.
    5. Mark G. Dotzour & Donald R. Levi, 1992. "The Impact of Corporate Ownership on Residential Transaction Prices," Journal of Real Estate Research, American Real Estate Society, pages 207-216.
    6. Andrew Leventis, 2006. "Removing Appraisal Bias from a Repeat-Transactions House Price Index – A Basic Approach," Staff Working Papers 06-01, Federal Housing Finance Agency.
    7. Schulz, Rainer, 2002. "Real estate valuation according to standardized methods: An empirical analysis," SFB 373 Discussion Papers 2002,55, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    8. Robert Edelstein & Daniel Quan, 2006. "How Does Appraisal Smoothing Bias Real Estate Returns Measurement?," The Journal of Real Estate Finance and Economics, Springer, pages 41-60.

    More about this item

    JEL classification:

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

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