Francesco Tajani, Pierluigi Morano, Francesca Salvo and Manuela De Ruggiero
The purpose of this paper is to develop an innovative model that can be included within the market approach methods for property valuations. The algorithm takes into account the…
Abstract
Purpose
The purpose of this paper is to develop an innovative model that can be included within the market approach methods for property valuations. The algorithm takes into account the frequent high level of dissimilarity of the comparables selected for the assessment, thus providing for the use of appropriate similarity and reliability coefficients capable of weighing the data of the comparison sample with respect to the different degrees of similarity and reliability.
Design/methodology/approach
The proposed model borrows the operative logics of the goal programming techniques, in order to identify the solution, the market value of the subject property and the implicit prices of the different influencing factors, since they are more reliable from the mathematical and empirical points of view.
Findings
The model has been applied to two case studies, relating to samples of residential properties located in the city of Naples (Southern Italy). The results obtained have outlined the high valuation performance of the developed appraisal model, capable of overcoming the applicability limits of classical market approach methods as well as providing solutions that are highly consistent with the expected empirical phenomena.
Practical implications
The research takes into account the growing need of both professionals and end users (banks, courts, public and private Entities, etc.) for valuation models that are easily repeatable and sufficiently objective. They are required in order to allow for the rapid verification of the elaborations carried out as well as to check the valuer’s appreciation of the contribution of the influencing factors in the market price formation. The outputs of the two applications developed have highlighted the ability of the proposed model to satisfy these market requests.
Originality/value
The proposed model can be easily implemented through a simple calculation program, with the mathematical structure elaborated allowing to overcome some application limits of the classical market approach methods. Furthermore, the introduction in the algorithm of appropriate similarity and reliability coefficients, capable of suitably weighting the data of the comparison sample, allows to widen the spatial horizon for the identification of the comparables as well as select properties characterized by a high level of dissimilarity. This makes it possible to apply the model in territorial contexts characterized by markets that are not excessively dynamic.
Details
Keywords
Francesco Tajani, Pierluigi Morano, Francesca Salvo and Manuela De Ruggiero
In this research a model for the rationalization of the assessment in a rent to buy contract has been proposed, in order to contextualize the economic amounts involved in the…
Abstract
Purpose
In this research a model for the rationalization of the assessment in a rent to buy contract has been proposed, in order to contextualize the economic amounts involved in the negotiation according to the specific market risk of the area where the property is located. The paper aims to discuss this issue.
Design/methodology/approach
The model borrows the logical principles of operational research, in order to take into account the convenience constraints of the parties involved (seller and buyer) and to determine the minimum amount of the additional annual rent to be charged as down payment on the final sale price, compensating the investment risk. The procedure proposed for the risk assessment combines the discrete modeling of real option analysis and the exponentially weighted moving average method, in order to weigh appropriately the data available for the specific area in the analysis.
Findings
Considering the limit conditions of variability of the property market value at the time provided for the notarial deed, the proposed model returns two values (minimum and maximum) for a fixed contract duration and for a specific market area for the annual additional rent, which define the reference range to ensure the compliance with the convenience constraints of the parties involved.
Practical implications
In order to test the reliability of the developed methodology, the model has been implemented to the 24 “microzones” defined by the Italian Revenue Agency for the city of Bari (Southern Italy). The results obtained were then georeferenced, in order to create thematic maps of convenience for the subjects interested in the rent to buy formula. The developed maps define a useful support to be consulted in the negotiation phase between the seller and the buyer, allowing both to verify the investment conveniences within the limits of their disposable incomes and their needs.
Originality/value
The tabulated values of the down-payment amounts and the related thematic maps constitute a valid support for both the parties in the initial negotiation phase of the contractual conditions: in fact, if comparable data for the assessment of the market value and the market rent at the time of the stipulation of the contract are ordinarily available, the increase in the rent, to be charged as the annual down payment on the final purchase price, is generally entrusted to the contractual capabilities of the subjects involved, since there is no market reference that can direct an appropriate assessment.
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Francesca Salvo, Marina Ciuna and Manuela De Ruggiero
A useful instrument to understand and examine the inner workings of the property trade is devising index numbers of property prices based on historical sequences of market prices…
Abstract
Purpose
A useful instrument to understand and examine the inner workings of the property trade is devising index numbers of property prices based on historical sequences of market prices. The present work aims at the definition of index numbers of property prices, proposing an innovative methodology compared with what usually recurs in literature. The purpose of this paper is to discuss these issues.
Design/methodology/approach
The analysis proposed, based on the mechanisms of formation of stock indices, investigates the analogies between stock and property information, according to the peculiarities of the property trade, leading to a methodology approach, derived from Simple Price Index Method, able to consider possible anomalies in the collected sample of purchase prices, using weighting coefficients based on reliability coefficients of sale prices of properties.
Findings
The novel approach proposed has led to the definition of a original methodology useful to appraise property price index numbers and other derived indicators, effective for interpreting and identifying real estate market dynamics in a given area of study, regarded as a standard estimating methodology applicable to any geographical context and kind of property.
Practical implications
Methodology proposed in this work is useful to revalue real estate sales price and to consider presence of anomalous sales price in property samples.
Originality/value
The calculation of index numbers of prices is usually based on Simple Price Index Methods. Literature shows large use of different methods, such as Repeat Sales Method, Hedonic Price Method, Repeat Value Model. The present work propose an innovative methodology able to detect the presence of possible anomalous market prices in the representative sample, using an appropriate vector of weights in order to take into account the level of reliability of market data.
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The study seeks to introduce a new media model that (1) clearly illustrates the role of mass media in the transmission of cultural messages, and (2) helps to explain variations in…
Abstract
Purpose
The study seeks to introduce a new media model that (1) clearly illustrates the role of mass media in the transmission of cultural messages, and (2) helps to explain variations in the reception and employment of cultural messages by members of the same culture.
Methodology/approach
Drawing on decades of theorizing in cultural sociology and communication studies, as well as data from two qualitative content analyses, a new model was developed, explained, and then applied to a specific cultural phenomenon.
Findings
Mass media are significant transmitters of cultural messages and play an influential role in shaping culture, yet the process is complex. There is great variety in what messages are accepted by different consumers, how they are interpreted, and how they ultimately are employed (or not). Further, cultures that include contradictory messages are more likely to inadvertently promote deviant paths to culturally valued goals.
Research limitations/implications
First, the model only addresses one dimension of the relationship between mass media and culture; it does not explain cultural influences on mass media. Second, the model does not specifically address recent changes in the media landscape, though an accommodation is suggested. Finally, the model needs additional testing before its utility can be reasonably determined.
Originality/value
First, a new model is introduced that clearly illustrates the complex process by which cultural messages are transmitted to receivers via mass media. Second, the model introduces the concept of “cultural capacity” to complement existing concepts and advance understanding of the operation of culture.