QUESTION 9

A real estate company has prepared a simple hedonic model to value houses in a specific downtown area. A summary list of the houses characteristics that can affect pricing are:

• The number of main rooms
• The surface of the garden (if any)
• The construction material (wood or brick)
• The distance to a subway station

A detailed statistical analysis of a large number of recent transactions in the area allowed to derive the following slope coefficients:

Characteristics	Units	Slope Coefficient in Euros per Unit
Number of rooms	Number	30,000
Surface of the garden	Square meters	200
Construction material (bricks)	0 or 1	30,000
Distance to subway station	In meters	-100

A typical house in the area has 5 main rooms, a garden of 500 square meters, constructed with bricks and a distance of 300 meters to the nearest subway station. The transaction price for a typical house was 250,000.

You wish to value a house that has 7 rooms, a small garden of 100 square meters, constructed in wood and a distance of 100 meters to the nearest subway station. What is the appraisal value based on this sales comparison approach of hedonistic price estimation?(4 points)