What is a regression tool for appraisers? In layman’s terms, it is a way to take statistical data and boil it down into a readable format. It is one thing for an appraiser to say the market is decreasing, increasing or stable, but can they support that comment beyond a gut-feeling? Regression analysis can help.
I know what you are thinking, “but Dustin, that is just more work. On top of everything else the AMCs are now asking for, do I really have time for one more step in the appraisal process?” It is a great question, but I would look at it differently. Regression analysis is not just one more step in the appraisal process. Instead, it very much is integral in appraising. It should be done on a regular basis (if not every time you do an appraisal), so why not make it easier by using some of the excellent tools that are currently available? As professionals, we should not be guessing at market trends or how our particular subject property will react in the current housing environment. To do so is faking it, and professionals don’t fake it.
I have tried a great number of regression tools and my experience has so far been less than impressive. As you know, I live in an area where tumbleweeds and cows outnumber people. Homes are built fairly far apart and statistical sampling can be difficult. That is not to say it is impossible, and even a rough statistical analysis is usually better than none at all.
Furthermore, a greater number of big lenders and AMCs are requiring some sort of computer analysis to back up our opinions as appraisers. Though some in our profession might push against this, I would not be so hasty. These reports are not always accurate or even needed, but they often provide just a little more evidence to back up what you are reporting anyway. There have been times when I have taken a ‘close to the trees’ look at a market and thought I knew what the trends were. Then, I pulled back to view the ‘forest’ using regression tools only to discover the Hundred-Acre Wood was not quite what I thought it was. This kind of realization can change everything in an appraisal report.
I am not going to promote just one product here. There are many to choose from. Some charge a flat fee and others a recurring one. Find what works best for you, but be careful. Often, you get what you pay for. There are some tried and true tools out there and some newcomers to the market. I am not saying the newbies are bad, but do your homework.
Now, go create some value!
For more information on this subject, please listen to The Appraiser Coach Podcast Episode:
