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Hedonic Pricing Model - used to evaluate a real estate property

Updated: Jul 17, 2019



A property can be evaluated many different ways. Using an Hedonic pricing model it's possible to evaluate a property, according to our wishes, differences, needs.


It works when calculating a price of a property, adding on the value of construction land and materials used (the internal characteristics), external surroundings factors, and we can add as many as we want. They will be the "variables" for the price calculation.


Those external factors can be: the neighborhood, if its accessible to the center, schools, the quality of water, the level of air pollution, the market price of the neighbor's house, the violence rate in the area, environmental issues. Anything we want!



Azulejo português - Portuguese tile



To use an Hedonic pricing model, it is required some knowledge, statistical information, and some time to collect all needed data. We do it at new MindEstate to our customers, they chose the external factors they need or care, we collect all data needed and go back to them with our results.


The Hedonic pricing model is also quite used, to determine or calculate, the influence that environmental or ecosystem issues have on home prices.


Using this model can brings us advantages and disadvantages. We can estimate the price, based on our own choices or needs, but it doesn't work when applied to property markets without available or credible data, and does not include local taxes, regulations or interest rates, on the final price of the house.



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