Comparative Evaluation of the Comparable Sales Method with Geostatistical Valuation Models

Abstract

There is an identifiable theoretical relationship between the comparable sales method (CSM) of valuation as practiced by mass appraisers and the recent developments in geostatistical valuation models. This paper provides an evaluation of techniques in respect of their treatment of location and their predictive capability. The CSM is shown to be a special case of a spatially lagged weight matrix model. There is a less formal but clear relationship with Geographically Weighted Regression as well. The predictive accuracy of CSM is compared to several Ordinary Least Squares Model configurations, and results obtained from Geographically Weighted Regression via empirical studies on diverse datasets. An example of a comparable sales weighting scheme as practiced by mass appraisers is provided. In addition, particular interest is focused on how well each method is able to model the spatial variations in property values.