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Review of Geographic Information Systems : GIS in Real Estate :
Integrating, Analyzing, and Presenting Locational Information
by Gilbert H. Castle (Editor)
Appraisal Institute Hardcover (November 1998).
Published in the December, 1998 issue of Appraisal
Today. Reviewed by Ann O'Rourke. Copyrighted. For reprint permission Contact Us.
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I have been following the developments in Geographic Information Systems (GIS) for the past 5-6 years, but it didn't seem to have much relevance for appraisers.
GIS in Real Estate: Integrating, Analyzing, and Presenting Locational Information, published by the Appraisal Institute and Adams Business Media/GIS World, has made me see how GIS can be used by appraisers. Most of the books and articles I have been on GIS were very technical or too "pie in the sky" for appraisers.
As I was reading this book I realized that many appraisers use geocoded mapping programs for their location maps, such as DeLorme's Street Atlas. My appraisal forms software integrates with a mapping program that produces a map and puts distances on the sales comparison grid.
Although GIS has advanced over the past 15 years, it is still in the early adopter stage. For fee appraisers GIS has tremendous opportunities in litigation support (residential and commercial) and commercial appraisal, particularly new construction. On the minus side, the GIS programs are difficult to operate, data is expensive, and few clients are willing to pay appraisers for GIS. Outsourcing is an
option.
About the authors
Each chapter has a different author, so you can probably find one who you can understand. Some chapters I found very useful, and some were too technical or dry, so I just skimmed them.
The editor is Gilbert Castle, who has spoken to appraisers and is well known in the GIS world. Some of the other authors are Steven Roulac, Bill Mundy, L. Reid Schott, and Bruce Weber.
The two chapters on residential are written by current and former NAR (National Association of Realtors) employees and focus on residential sales, but other chapters have very interesting analysis of residential applications such as AVMs.
The focus is on practical uses. What is GIS? The authors have differing definitions of GIS.
The preface, written by Gilbert Castle, defines it as "a marriage between computerized mapping and database management systems." Steven Roulac defines it as "a technology than presents and processes information in a spatial context, defined by the coordinates of location on the globe. GIS is both an analytical and communications tool, which allows people to understand and see relationships that would otherwise be difficult to grasp."
"GIS is a set of computerized tools (including both hardware and software) for collecting, storing, retrieving, transforming, and displaying spatial data," per Michael Robbins.
Computerized mapping vs. GIS
L. Ried Schott, MAI, clears up the difference between digital mapping and GIS. "Computerized mapping is much simpler than GIS and can accomplish many basic GIS tasks...GIS is mapping with intelligence. Mapping software shows you want it has and can give you limited information about cities, states, or places.
GIS shows you what you want using information that you decide it should have. The difference is similar to having a meal delivered from a take-out menu versus making a meal from scratch. You can make yourself just about anything, but must limit your options to those selected by another person." With computerized mapping, appraisers prepare location maps with automatically imported addresses for comps.
GIS allows you to overlay information, such as overlaying a flood map over the sales to see which were affected by hazardous flood zones. Mapping products are driven by consumer demand and are thus low priced and easy to use.
GIS vendors focus on customized government and business applications. Few customized products have been developed for real estate.
Some thought-provoking comments
"The most valuable component (of) GIS is its ability to convey efficiently considerable amounts of information on spatial relationships that are not discernable in tabular data and to integrate disparate databases." From Bruce Weber's chapter referring to a Gilbert Castle article.
"Real estate is information arbitrage. Since the economic depression of the real estate industry in the 1980s and 1990s, real estate professionals have learned to be increasingly data- and computer-intensive in their decision making," says Gilbert Castle.
"Too many real estate analysis reports of the 1970s and 1980s could be described as their unifying theme the binding that held different pages together. The majority of these reports were largely innocent of an integrating perspective; linkages were not made and implications were not drawn. Conclusions concerning rental rates, absorption, projected investment returns, values, and risk factors were essentially disconnected from the information presented on national economic forces, regional economics....," says Steven Roulac. Also, "It is crucial to remember that (GIS) is a technology and is not, in itself,
content."
What about the software?
Both software and data must be considered. The data may be more expensive than the software. Prices on GIS software vary from the high end, often Unix-based programs well over $10,000 to low-end mapping type programs for a few hundred dollars.
Schott's chapter has information on software.
Who uses GIS in real estate?
The principal users are government agencies such as the Bureau of Land Management and assessors offices. Timber companies were early adopters. Use in industries such as retailing, insurance, manufacturing is increasing. Most, if not all, of the 35 institutional investment firms use GIS to manage their portfolios.
CB Commercial, and some other brokerages, use GIS for identifying and tracking properties available for lease and for sale, and other uses. Chevron Corporation's corporate real estate department uses GIS to manage their properties. GIS and residential lending
The most far reaching use of GIS in lending has been by financial institutions for CRA (Community Reinvestment Act) and HMDA (Home Mortgage Disclosure Act)
compliance.
GIS examples - contaminated sites and appraisal review
Bruce Weber, MAI, was a review appraiser at the FDIC for many years, and has an appraisal and consulting firm Market Foresight. His chapter in the book has several practical examples of using GIS in appraisals.
Weber discusses using GIS in appraisals for:
- measuring the area and volume of a contaminated site• finding properties that sold near a contaminated
site
- location of relevant population in an appraisal review of conflicting appraisals• supply and demand for biologically valuable
land
- supply and demand for industrial and retail properties•
- apartment market forecast
Weber sees GIS as a way for appraisers and appraisals to become more relevant.
"The appraisal process is becoming more and more a word processing activity that reproduces prior assignments and tries to get paid on the basis of a new assignment," quoted an article written by Steven
Roulac.
A book on brownfields said, "What is missing in this country are appraisers who can place a value on contaminated property ‘as is' and "only a handful of appraisers in the United States are willing and able to perform this key function in appraising
brownfields."
Why do very few appraisers use GIS now?
Except for mapping programs, very few appraisers use GIS.
Why? Their clients won't pay any extra fee for GIS. Appraisers' fees are too low to add anything extra to the reports. Clients' first choice would be using less boilerplate and making the report more relevant to the actual assignment, rather than including GIS in the appraisal. In large fee assignments the cost is certainly justified as the client pays for it. The GIS work could be outsourced to company specializing in GIS.
GIS and the Sales Comparison Approach
Benefits in the Sales Comparison Approach per Gilbert
Castle:
- See the locations of the subject and comps on a map. Click on a comp and see data on the property and a
photo
- Obtain supplemental data on a comp, such as flood hazard and traffic volume• integrate with financial
models
Should you buy this book?
If you want to keep up on the latest real estate technology, both residential and commercial, buy this book.
If you do litigation support and high-end commercial appraisals, buy this
book.
Where to get more information
In contrast with other books published by the Appraisal Institute, which include lists of paper references and sometimes a few web sites, this book only lists Web sites as references in the back of the book. There are many GIS Web sites.
Two of the author's sites that I found useful
are:
- www.marketforesight.com
- Bruce Weber's Web site has information on the practical use of GIS in appraising.
- www.castleconsulting.com
- Gilbert Castle's Web site has full text of some of the articles he has written plus links to other sites. The site does not appear to have been updated much since 1997, but has some good links and articles.
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