A Guide to Appraisal Valuation Modeling Review

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(More customer reviews)Given its monetary importance, it is not at all surprising that real estate valuation would be one of the first activities to be automated. Even though the concepts needed were in place long before the first AVM tools make their way on the market, the technology and data was not available. The Internet explosion changed all that, and now the enormity of the available real estate information actually dictates that automated valuation be performed. The use of AVMs has made appraisals dramatically less expensive, and most importantly, has lowered the incidence of fraud by removing the human element and the consequent temptation to inflate housing prices. And even more importantly, the declining real estate market at the present time and the accompanying aversion towards risk by lending institutions has resulted in the development and use of many different types of AVM tools, and vendors of these tools are working diligently to improve and market them.
Appraisal valuation modeling, the subject of this very short book, can be considered to be a branch of the field of spatial econometrics. The content of the book however is quite elementary, and no sophisticated mathematics is used. Many AVM tools make heavy use of concepts from artificial intelligence and mathematical statistics, but the authors have chosen to write a book that will be helpful to the mortgage underwriter/risk manager, and so the book is not directed towards developers or modelers. The book addresses several questions important to these types of readers: 1. How can appraisers decide which type of analysis to use and how can one AVM tool be distinguished from another? 2. What is the difference between `mass' and `single-property' appraisals? 3. What is the difference between `cost', `sales comparison', and `income capitalization' approaches to valuation? 4. What are the advantages and disadvantages in using `adjustable' versus `fixed' AVM tools? 5. Is an AVM tool that is dependent on dozens of different variables always better than one that is based only on a few? 6. When can a valuation model be considered to be "good"? 7. How do you incorporate "subjective" property characteristics in a valuation model?


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A Guide to Appraisal Valuation Modeling will introduce skeptics to the mathematical modeling of market behavior. The handbook covers fundamental statistics and the basics of regression analysis and model construction. Many of these topics are brought together in a case study on the valuation of lots in an actual residential subdivision.

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Financial Modeling Review

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(More customer reviews)Simon Benninga's 3rd Edition of Financial Modelling with Excel is the single most useful book for finance students and professionals ever published and continues to offer an outstanding reference and textbook for students and practitioners of applied finance.
For further information, please use the "Look Inside" feature and examine the Table of Contents carefully, because I will emphasize selected portions.
It is difficult to overstate how useful and practical and helpful this work is for a wide audience and Financial Modelling is the single finance book I recommend for everyone after they have taken (or read themselves) Introductory Finance.
For those looking for "one-stop-shopping" for models that resemble those of professional financial analysts then there is no better value than Benninga's FM3.
Benninga's FM3 is a coal-face work for those who must make financial decisions using models. There are further specialist texts in topics covered here (credit modelling, portfolio construction, option pricing), but the models in FM3 are the first advanced models applied to loans, bonds, options, and equity portfolios. Master these and then specialized texts are easier to digest.
"Cookbook" metaphors are too strong and do not do this work justice, for Financial Modelling 3rd (FM3) is not a mere collection of recipes but rather topical introduction, explanation, and then direct technique.
If we can make a comparison with a "cookbook" then FM3 falls somewhere between "The Joy of Cooking" and "Mastering the Art of French Cooking." "Joy" combines chapters on technique, ingredients, and tools with dense pages of endless recipes, whereas "Mastering" emphasises technique and a few well-selected recipes.
The welcome new chapters cover bank valuation, the Black-Litterman approach to portfolio optimization, and Monte Carlo methods and applications to option pricing, and the previous 2nd edition's small chapter on using array functions and formulas has been expanded. The chapter on data downloads from YAHOO is also welcome, especially for those on a budget.
There is a single significant flaw in the work, which is excusable and redeemable. Far too often the discounting in the chapters is done over a flat interest rate curve. While the term structure of interest rates is covered, and historical term structures and parallel shifts and steepening and flattening is covered in isolation in a thorough chapter and with wonderful data files, the necessity and explicit connection of discounting from an appropriate yield curve is left implied and only mentioned in a few exercises. I would have preferred a "round up" chapter where each of the subjects treated (bond discounting, portfolio expected returns, options, etc.) under a yield curve with advanced models. Sure BLOOMBERG and REUTERS have these sort of things (often incorrectly) programmed, but students need to learn explicitly about them and do the exercise themselves to comprehend the importance of curve discounting.
The CD attached in the back of the book is alone worth the price, with over two score of models that are practical and adaptable for students and professionals alike. The files are stored and separated according to chapters and subject matter. Each file has logical progression of the concepts advanced in the book, and each separate sheet either stands alone or appropriately links to data and models on other sheets, so editing for your own purposes is a breeze.
For those who want to train themselves in Finance (not "personal finance") then I suggest reading Copeland, Weston, & Shastri's Financial Theory and Corporate Policy (4th Edition) and Brealey, Myers, and Marcus's "Corporate Finance" and "Investments" followed by working through FM3. Such a course would give any self-disciplined person the equivalent of a Masters of Science in Finance.
Full disclosure: I am thanked in the "Acknowledgements" for providing a few helpful comments on the second edition.

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"The new edition of Simon Begginga's Financial Modeling is acomprehensive and effective learning-by-doing tool in motivating users and makingeasily accessible the concepts of modern corporate finance, investments, andderivatives. In the real world of finance, its clear step-by-step approach empowersthe practitioner to search the internet for financial data, build programs toanalyze them, and make sound financial decisions. I strongly recommend it to thefinance student and practitioner alike."--George Constantinides, Leo MelamedProfessor of Finance, The University of Chicago Graduate School ofBusiness (George M. Constantinides )

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