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Qualitative Analysis
Vs.
Quantitative Analysis
06/16/2014 1
What’s the Difference?
Qualitative adjustments are purely
relative (inferior, similar and superior).
Quantitative adjustments use specific
numbers (% or dollar amounts).
06/16/2014 2
What does Appraisal Institute say about
qualitative analysis?
Qualitative analysis recognizes the inefficiencies
of real estate markets and the difficulty in
expressing adjustments with mathematical
precision. It is essential therefore, that the
appraiser explains the analytical process and
logic applied in reconciling the value indications
using qualitative analysis techniques such as:
06/16/2014 3
The following information is paraphrased from The 14th Edition of the
Appraisal of Real Estate, published by the Appraisal Institute
What does Appraisal Institute say about
qualitative analysis?
Trend analysis
Relative comparison analysis
Ranking analysis
06/16/2014 4
The following information is paraphrased from The 14th Edition of the
Appraisal of Real Estate, published by the Appraisal Institute
What does Appraisal Institute say about
qualitative analysis?
The following information is paraphrased from The 14th Edition of the
Appraisal of Real Estate, published by the Appraisal Institute
Relative comparison analysis is the study of
relationships indicated by market data
without recourse to quantification. Many
appraisers use this technique because it
reflects the imperfect nature of real estate
markets.
06/16/2014 5
What does Appraisal Institute say about
qualitative analysis?
“Reliable results can usually be obtained by
bracketing the subject between comparable
properties that are superior and inferior to it…
The appraiser must search the market diligently
to obtain and analyze sufficient pertinent data
to bracket the value of the subject.”
06/16/2014 6
The following information is paraphrased from The 14th Edition of the
Appraisal of Real Estate, published by the Appraisal Institute
What does Appraisal Institute say about
quantitative analysis?
Several techniques are available to quantify
adjustments to the sale prices of comparable
properties:
Paired sales or grouped data analysis
Statistical analysis
Cost-related adjustments (cost to cure,
depreciated cost)
06/16/2014 7
The following information is paraphrased from The 14th Edition of the
Appraisal of Real Estate, published by the Appraisal Institute
What does Appraisal Institute say about
quantitative analysis?
Capitalization of income differences
06/16/2014 8
The following information is paraphrased from The 14th Edition of the
Appraisal of Real Estate, published by the Appraisal Institute
Appraisers can usually find some logic to
support most quantitative adjustments given the
number of tools available to them.
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Most quantitative adjustments
appraisers make are simply qualitative
adjustments presented as percentages.
They are not directly supported by
market data.
We should quantify adjustments based
on market data whenever possible.
06/16/2014 12
Note: percentages as dollar amounts
may look very different to the lay reader
Comp 2: (50% of $1.54/SF = $0.77/SF)
Comp 3: (-20% of $3.69/SF = -$0.74/SF)
06/16/2014 13
No difference exists in terms of
research or valuation between
qualitative and quantitative analysis.
The two techniques simply represent
two forms of presentation.
06/16/2014 14
As appraisers, we should select the
presentation style that best
communicates our analysis without
being misleading. The best technique
may be different from one data set to
the next.
06/16/2014 15
The Appraisal Institute supports the
use of qualitative analysis.
My informal survey results also clearly
highlight that qualitative analysis is a
relatively common and accepted
technique.
06/16/2014 16
My Position on the Topic?
No right or wrong answer.
06/16/2014 17
Qualitative vs. Quantitative Analysis
Historically, I’ve used qualitative analysis
with fair or poor data sets. If I have a
quantitative adjustments then will use
them. As appraisers, we should select
the presentation style and accompanying
narrative which best communicates our
analysis without being misleading.
06/16/2014 18
Above all, the appraiser
must be careful to ensure
that adjustments made to
the comparable sales
reflect the reactions of
market participants.
06/16/2014 19
