Estimating Adjustment Factors for the Sales Comparison Approach in the Presence of Heterogeneous Housing and Thin Markets

The two most recommended methods for estimating adjustment factors in the sales comparison approach are multiple regression analysis and paired data analysis. Both methods, however, can rarely be applied to particular types of real estate markets, such as the Italian real estate market, which are characterized by heterogeneous housing and a small number of housing sales (thin markets). Our proposed approach exploits the basic idea of the analytic hierarchy process and provides a potential alternative to the two most recommended methods in estimating adjustment factors in such markets. Indeed, the approach proves to be very useful when the number of main characteristics affecting house prices is almost equal to the number of housing sales.