Question

Sam Easton started out as a real estate agent in Atlanta ten years ago. After working two years for a national real estate firm, he transferred to Dallas, Texas, and worked for another realty agency. His friends and relatives convinced him that with his experience and knowledge of the real estate business, he should open his own agency. He eventually acquired his broker’s license and before long started his own company, Easton Realty Company, in Fort Worth, Texas.
Assignment
The real estate data compiled by Pat McCloskey for Sam Easton are contained in the file EASTON. The Data Description section provides a partial listing of this data file along with definitions of the variables. Using this data set and other information given in the case, help Sam Easton respond to the underpricing claims of his former clients. The Case Questions will assist you in your analysis of the data. Use important details from your analysis of the data to support your recommendation.
1. Considering the claim that the two houses in question did not sell for their fair market value:
a. Compare the selling prices of the two houses to the average selling price of all houses sold in the most recent three-month period. Does the difference appear to be substantial?
b. Provide at least two reasons why the comparison in part (a) is not fair—i.e., describe at least two pricing factors that are not being considered in drawing the comparison in part (a).
c. In making their argument, the complaining sellers are relying heavily on the average selling price ($104,250) stated in the article for all homes sold in the area during the previous twelve months during a weakening housing market. Compare the $104,250 average with that for all houses sold in the area during the most recent three months, then comment on how this comparison might affect the validity of their argument.
2. Use a multiple regression model to estimate PRICE as a function of SQFEET, BEDROOMS, AGE, DALLAS, and EASTON.
a. Interpret the partial regression coefficients in the equation. Specifically, comment on the sign and numerical value of the partial regression coefficient for EASTON in terms of the claim that Easton Realty Company has been under pricing its residential properties relative to other real estate companies.
b. For each of the two houses that are the subject of complaints, construct and interpret the 95% prediction interval for a comparable house that is being sold by a realtor other than Easton.
c. On the basis of your analyses in question 1 and in parts (a) and (b) of this question, prepare a brief, convincing response to the claims of underpricing.


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  • CreatedSeptember 08, 2015
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