Schaerer, Caroline

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BOOK REVIEWKauko Tom and d’Amato Maurizio (Eds.):Mass Appraisal Methods. An international perspectivefor property valuers, 2008, Wiley-Blackwell,pp. 319, ISBN: 978-1-4051-8097-9Caroline SchaererReceived: 27 April 2009 / Accepted: 28 July 2009 / Published online: 4 September 2009 Springer Science+Business Media B.V. 2009The book Mass Appraisal Methods—An international perspective for property valuerspresents and reviews the techniques of mass appraisal that are currently used in differentcountries. In addition to the rather traditional techniques, it also discusses innovative andemerging methods. Aside from reviewing their relative performances, the book reveals thatthe development and the choice of the optimal appraisal method for property valuationsshould be based on criteria reflecting the particular property market environment where thevaluation takes place. Indeed, due to countries’ specific institutional contexts and regu-lations, a mass appraisal methodology that is pertinent in a given property market situationmay not be suitable for other property markets. Given that the different appraisal methodsapply to different contexts, none of the proposed mass appraisal methods can be said to bemore efficient than another.The different methods of mass appraisal reviewed in the book are subdivided into twogroups: the traditional property valuation methods, referred to as the orthodox methods;and the emerging methods, referred to as heretic techniques. The most popular andcommonly used mass appraisal method belonging to the orthodox category is the hedonicapproach. However, the book editors insist that the hedonic model may not capture all theinformation needed to determine property market value. It is correct that the hedonic modelis based on the strong assumption that the housing market is in equilibrium. Obviously, theassumptions underlying the standard hedonic price models are not fulfilled on real markets,in which imperfections such as rent regulation, high heterogeneity of dwellings, barriers tohousing supply, and high search and moving costs are well known. I should, however,emphasise that this caveat does not necessarily render the hedonic model worthless. On thecontrary, being aware of the limitations of the model allows one to take them into accountdirectly when modelling the hedonic equation. Some researchers have even used hedonicmodels to reveal and measure the consequences of market imperfections. For example, inC. Schaerer (&)Geneva School of Business Administration (HEG-Ge), Center for Applied Research in Management(CRAG), University of Applied Sciences of Western Switzerland (HES-SO), 7 route de Drize,1227 Carouge, Geneva, Switzerlande-mail: caroline.schaerer@hesge.ch123J Hous and the Built Environ (2009) 24:495–497DOI 10.1007/s10901-009-9156-yorder to correct for the asymmetry of information, a hedonic model can account for the factthat house prices are generally negotiated bilaterally rather than set by an auctioneer on aperfect market. The resulting bargaining effects on the housing market can be estimatedusing the hedonic model (see Knight 2008). In the same vein, Chap. 6 of Mass AppraisalMethods presents some extensions to the hedonic model that account for the spatialdependencies in the housing markets.Nevertheless, as emphasised by Thompson in Chap. 2, it is obvious that the performanceof appraisal methods depends above all on the availability of good and reliable data and onthe sound stratification of the market. Indeed, the data requirements in the hedonic modelare particularly high since this model is deterministic in the relationship between propertyprices and characteristics. In case good quality and reliable data are not available, theeditors argue that the application of emerging methods can be helpful. These heretictechniques bring more flexibility into the property value calculations as they are not relatedto any theoretical assumption.Considering the above, the book contains fourteen chapters divided into four main parts.The first part, from Chaps. 2–5, covers the current mass appraisal practices. In Chap. 2,Thompson presents a modelling process that combines the automated comparable salestechnique and multiple regression analysis. In Chap. 3, Borst and McCluskey present amodified comparable sales method that is based on a measure of dissimilarity between thedifferent properties. Op’t Veld, Bijlsma and Van de Hoef explain, in Chap. 4, how themarket value of any house in the Netherlands is assessed using a web application thatallows for valuing any house given its characteristics based on a hedonic model. In light ofthe practices described in these chapters, we note that multiple regression analysis for massappraisal is currently used in the US and Dutch property markets.In Chap. 5, d’Amato and Siniak argue that when the market is non-competitive or whencompetition is only emerging, there should be no expectation of assessing the exact valueof a property. They describe how fuzzy numbers can be used in such cases and thenillustrate this mass appraisal technique by showing an application to the property market inBelarus.The second part of the book (Chaps. 6–9) deals with current advanced methods. Itconcerns principally the spatial heterogeneity of property markets and the necessity ofincorporating spatial characteristics in the property valuation process. More specifically, inChap. 6, Des Rosiers and The´riault illustrate how urban externalities such as accessibilityto urban services and proximity of high-voltage transmission lines can be accounted for inthe hedonic model and how spatial heterogeneity can be modelled. In Chap. 7, Renigiershows that the spatial analysis of the residuals can be very informative for predictingproperty values with enhanced precision. In Chap. 8, Francke presents hierarchical trendmodelling, a statistical model which accounts for time and spatial dependence.The third part of the book describes the emerging heretic methods. In Chap. 9, StrumpfGonzalez presents a flexible model for mass appraisal using fuzzy systems based on aneural network and genetic algorithm. In Chap. 10, Kauko presents two modelling tech-niques: the self-organizing map, which refers to data pattern recognition and clustering;and the analytic hierarchy process, which is about decision analysis and expectingjudgements to uncover additional information from the data. Finally, in Chap. 11, d’Amatointroduces the rough set theory valuation method that relies on internal knowledge pro-vided by the data.This volume makes an interesting contribution to the literature on mass appraisaltechniques. It is well written and clearly structured. That said, the inclusion of Chap. 5among the current methods (first part of the book) instead of the emerging methods (third496 C. Schaerer123part) is questionable, particularly because fuzzy numbers are apparently not used in currentvaluations of the Belarusian property market. The chapters are generally accessible,although the mathematical developments can be rough-going, especially in the chapters onemerging methods. Nonetheless, its major advantage is that it gives the state of the art ofproperty valuation methods, including examples of current practices in the propertymarkets. When referring to mass appraisal techniques, one usually thinks of hedonic andcomparable sales methods. Hence, presenting and explaining the development andadvances of heretic techniques in mass appraisal is very instructive. In addition to theproperty valuers, this book may therefore be of interest to the academic community as well.ReferenceKnight, J. R. (2008). Hedonic modeling of the home selling process. In A. Baranzini, J. Ramirez,C. Schaerer, & P. Thalmann (Eds.), Hedonic methods in housing markets. Pricing environmentalamenities and segregation. Springer: New York.Book Review 497123

Kauko Tom and d'Amato Maurizio (Eds.): Mass Appraisal Methods. An international perspective for property valuers, 2008, Wiley-Blackwell, pp. 319, ISBN: 978-1-4051-8097-9

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Kauko Tom and d'Amato Maurizio (Eds.): Mass Appraisal Methods. An international perspective for property valuers, 2008, Wiley-Blackwell, pp. 319, ISBN: 978-1-4051-8097-9

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