Let me try to make a case for what we call – Model Driven Valuation.
For many years now the real estate appraisal industry has been grappling with numerous forms for various different property valuation needs. Talk to any appraiser in the industry and you will hear numbers such as 1004, 1073, 1025, and a lot more. While the forms serve the purpose of ensuring completeness of an appraisal report to be submitted and approved, they do not lend themselves to the process of preparing an appraisal. Let me explain.
The appraisal process followed by every valuation expert trained in USPAP (Uniform Standards of Professional Appraisal Practice) is mostly driven by models. As we know, appraisers primarily work on 3 high level models – a sales comparison model, a cost model, and an income model to finally reconcile and derive a value for a property. But to support their work for each of these high level models, appraisers prepare many additional underlying models. Examples of such models include, paired sales model or a regression model for sales comparison adjustments, a site value extraction model to support the land value in the cost approach or a discounted cash flow model in the income approach. At PropMix, we call such an appraisal process Model Driven Valuation. Read the complete article on Profet website.
