Real estate appraisal: a review of valuation methods. Elli Pagourtzi and Vassilis Assimakopoulos.Real estate appraisal, property valuation or land valuation is the process of. Have provided a review on the methods used in the industry by. Of the Treasury Blueprint for a Modernized Financial Regulatory Structure PDF.Real Estate Appraisals: Common Issues and Best Practices. In our review of appraisal reports, we are finding that although many appraisals contain a. of this valuation method from the appraisal requires that the appraiser discuss the.

Valuation is often said to be "an art not a science" but this relates to the techniques employed to calculate value not to the underlying concept itself. Valuation is the process of estimating price in the market place. Yet, such an estimation will be affected by uncertainties. Uncertainty in the comparable information available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. These input uncertainties will translate into an uncertainty with the output figure, the valuation. The degree of the uncertainties will vary according to the level of market activity; the more active a market, the more credence will be given to the input information. In the UK at the moment the Royal Institution of Chartered Surveyors (RICS) is considering ways in which the uncertainty of the output figure, the valuation, can be conveyed to the use of the valuation, but as yet no definitive view has been taken apart from a single Guidance Note (GN5, RICS 2003) stressing the importance of recognising uncertainty in valuation but not proffering any particular solution. One of the major problems is that Valuation models (in the UK) are based upon comparable information and rely upon single inputs. They are not probability based, yet uncertainty is probability driven. In this paper, we discuss the issues underlying uncertainty in valuations and suggest a probability-based model (using Crystal Ball) to address the shortcomings of the current model.

Access to this document was granted through an Emerald subscription provided by INDIANA UNIVERSITY MEDICAL For Authors:If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comWith over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -Valuation is the process of estimating price. The methods used to determine value attempt to model the thought processes of the market and thus estimate price by reference to observed historic data. This information is utilised in the discounted cash flow (DCF) valuation model to determine the single point valuation figure. However, the valuation will be affected by uncertainties: uncertainty in the comparable data available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. These input uncertainties will translate into an uncertainty with the output figure, the estimate of price. This paper discusses ways in which uncertainty can be incorporated into the DCF model. Design/methodology/approach -This paper looks at the way in which uncertainty can be incorporated into the explicit DCF model. This is done by recognising that the input variables are uncertain and will have a probability distribution pertaining to each of them. Thus by utilising a probability-based valuation model (using Crystal Ball) it is possible to incorporate uncertainty into the analysis and address the shortcomings of the current model. Findings -The outcome of introducing uncertainty in the inputs is to produce a range of different answers. The central tendency of this distribution is very close to the single point estimate of the static model, yet the user of the technique now benefits from an understanding of the upside and downside risk pertaining to this single point estimate.Originality/value -This study contributes significantly to the practical application of probability-based models to valuation. In particular, the findings from the study will be useful for clients to understand better the context in which a valuation figure is provided to them.

Real estate development appraisal is a quantification of future expectations. The appraisal model relies upon the valuer/developer having an understanding of the future in terms of the future marketability of the completed development and the future cost of development. In some cases the developer has some degree of control over the possible variation in the variables, as with the cost of construction through the choice of specification. However, other variables, such as the sale price of the final product, are totally dependent upon the vagaries of the market at the completion date. To try to address the risk of a different outcome to the one expected (modelled) the developer will often carry out a sensitivity analysis on the development.