What is one of the limitations of multiple regression analysis in real estate appraisal?

One of the key limitations of multiple regression analysis in real estate appraisal is that it does not produce separate land and building values. In many appraisal contexts, it is important to distinguish between the value of the land and the value of the improvements (such as buildings) on that land. Multiple regression can provide an overall value estimate based on various contributing factors, but it typically calculates a combined value that does not break down these components. As a result, this analysis can complicate the valuation process when appraisers need to provide clear, distinct values for land and improvements for purposes such as taxation, financing, or property sales.

While it is true that conducting multiple regression can be resource-intensive and may require specific statistical software, these aspects are not inherent limitations of the analysis itself regarding value separation. Additionally, multiple regression techniques are actually quite adaptable and can handle large datasets, making them suitable for many real estate scenarios. The critical limitation remains in the inability to isolate land from building values, which can be a significant factor in the effective appraisal process.