Method of the corrected distance for the valuation of real estate

Abstract

This article presents a novel valuation model by market comparison that requires a minimum application of criteria by the appraiser, thus seeking the highest degree of objectivity possible. The premise that supports the model is that the price differences observed between comparable assets of the same market must be proportional to the dissimilarities (distances) between those same assets, but it shows that not every distance implies a price gap, so a corrected distance is used. The solution of the model requires the use of non-linear programming, and an example shows that the results are very similar to those obtained by applying Goal Programming, which is another optimization method applicable to the valuation of real estate.