Lusht, Kenneth M., Real Estate Valuation: Principles and Applications

Real Estate Valuation: Principles and Applications is a fine new addition to the appraisal literature. It is a well thought out, superbly organized textbook that is appropriate for most senior-level and graduate-level college courses dealing with real estate appraisal. Professor Lusht has accomplished a clarity of thought that few have been able to reach in the past. Part I is a fairly traditional explanation of the process, the need for real estate appraisal, and the notion of value. Although the chapter dealing with market value is well done, it is not remarkably distinct from previous work. It is in Part II where the departure from the norm begins. The author embarks on an exposition of real estate economics that is relevant to the prospective value analyst. This is done with straightforward explanations, pertinent examples, and useful tables and graphs. Of particular significance is his handling of the highest and best use concept. He points out that the idea of expected use may be more reflective of how marketplace participants really respond and that the strict interpretation of highest and best use may no longer be as useful. Dr. Lusht is careful, however, to point out that the greater percentage of the appraisal community still clings to the conventional interpretation of highest and best use. The presentation of the direct sales comparison approach begins in Part III and is quite good. It combines the typical subject matter with a novel approach to explaining the procedure. He carefully intertwines theory with fresh examples that deal with issues ranging from age of the subject and comparable sales to sample size. The discussion of the adjustment process is simply superb. There is an elaborate discussion of the matched-pairs operation; it is intuitive as well as practical. (A stylistic advantage of this textbook is the author's decision to present the theory and, when necessary, illustrate why that theory is difficult to apply, not cost effective or simply impractical. He does this throughout the book.) At Chapter 7, Dr. Lusht introduces statistical analysis as a means of executing the direct sales comparison method. He provides a helpful refresher/primer for basic statistics. More important, the reader is given reasons why statistical analysis is useful to the appraiser/ analyst. The examples again are easy to absorb and the level of detail is on target. In Chapter 8, the application of regression analysis to the sales comparison process is introduced. The discussion takes a topic that is frequently avoided by students and makes it elegantly understandable. Sample runs, both simple and multiple regression, expose the reader to the power of the tool in the face of inferior comparable data. The author shows the mechanics as well as the logical basis for applying the technique. He does an especially good job pointing out the benefits and the limitations. For example, his discussion of multicollinearity removes the fog factor from the concept. A careful read of the chapters dealing with statistical inference can help students overcome the typical confusion and aversion to using these procedures in real estate appraisal. The chapter dealing with site valuation is adequate. While Professor Lusht is innovative in many parts of the text, this section is fairly typical of prior work on the topic. Part IV is a thorough discussion, three chapters, of the cost approach. He begins with an overview and then devotes one chapter to estimating costs and another chapter to clarifying the mystery of depreciation. …