Client influence in residential property valuations: an empirical study

This paper investigates the extent to which clients were able to influence performance measurement appraisals during the downturn in commercial property markets that began in the UK during the second half of 2007. The sharp change in market sentiment produced speculation that different client categories were attempting to influence their appraisers in different ways. In particular, it was recognised that the requirement for open-ended funds to meet redemptions gave them strong incentives to ensure that their asset values were marked down to market. Using data supplied by Investment Property Databank, we demonstrate that, indeed, unlisted open-ended funds experienced sharper drops in capital values than other fund types in the last quarter of 2007, after the market turning point and at the time when redemptions were at their highest. These differences are statistically significant and cannot simply be explained by differences in portfolio composition. Client influence on appraisal forms one possible explanation of the results observed: the different pressures on fund managers resulting in different appraisal outcomes.

Section: Previous Researchmentioning

confidence: 74%

Means, motive and opportunity? Disentangling client influence on performance measurement appraisals

Crosby¹,

Lizieri²,

McAllister³

2010

“…Their experiments typically measure the effect of a bias-triggering intervention (such as a fictive reference point or client request) on market value estimates produced by valuers who are divided into a treatment group and a control group. Similar experiments, either through a classroom setting or via survey, have been conducted by various scholars, including Diaz and Wolverton (1998), Cypher and Hansz (2003) and Amidu and Tajudeen Aluko (2007b). As such, experimental research has provided an important contribution to the progression of judgement bias research in its current stance.…”

Section: Discussion Of Resultsmentioning

confidence: 91%

“…Hansz and Diaz III (2001) and Hansz (2004a) add that critical feedback on previous value assignments trigger US commercial valuers to provide more positive value estimates in subsequent (but unrelated) valuations assignments. Client size, transaction-related valuation assignments and lack of market transparency may also instigate value revision by general practice valuers in less mature real estate markets, such as Singapore, Taiwan and Nigeria (Amidu & Aluko, 2007a;Nwuba, Egwuatu, & Salawu, 2015b;Nwuba et al, 2015a), albeit not the case in residential settings (Amidu & Tajudeen Aluko, 2007b).…”

Section: Interpersonal Valuer Judgement Biasmentioning

confidence: 99%

Research bias in judgement bias studies – a systematic review of valuation judgement literature

Klamer

Gruis

2017

a faculty of economics and Management, hu university of applied sciences, utrecht, the netherlands; b faculty of humanities, utrecht university, utrecht, the netherlands; c faculty of education, hu university of applied sciences, utrecht, the netherlands; d faculty of architecture and the Built environment, Delft university of technology, Delft, the netherlands ABSTRACT Valuation judgement bias has been a research topic for several years due to its proclaimed effect on valuation accuracy. However, little is known on the emphasis of literature on judgement bias, with regard to, for instance, research methodologies, research context and robustness of research evidence. A synthesis of available research will establish consistency in the current knowledge base on valuer judgement, identify future research opportunities and support decision-making policy by educational and regulatory stakeholders how to cope with judgement bias. This article therefore, provides a systematic review of empirical research on real estate valuer judgement over the last 30 years. Based on a number of inclusion and exclusion criteria, we have systematically analysed 32 relevant papers on valuation judgement bias. Although we find some consistency in evidence, we also find the underlying research to be biased; the methodology adopted is dominated by a quantitative approach; research context is skewed by timing and origination; and research evidence seems fragmented and needs replication. In order to obtain a deeper understanding of valuation judgement processes and thus extend the current knowledge base, we advocate more use of qualitative research methods and scholars to adopt an interpretative paradigm when studying judgement behaviour.

“…In this case, for example, the LVD valuers might have provided low valuation opinions compared to high valuation figures from the private valuers for their clients, which could lead to excessive variation. Indeed, recent real estate behavioural studies Schuck, 1999, 2005;Amidu and Aluko, 2007;Chen and Yu, 2009;Crosby et al, 2010;Iroham et al, 2014;Nwuba et al, 2015;Bellman and Öhman, 2016) have brought to the fore that client influence is pervasive in valuation practice and this may lead to anchoring in valuation. Although it is probable, the evidence of client influence on valuations in Ghana is unclear and, in particular, those relating to compensation valuations.…”

Section: Datamentioning

confidence: 99%

The role of task complexity in valuation errors analysis in a developing real estate market

Awuah

Gyamfi-Yeboah

2017

Th e r ol e of t a s k c o m pl exity in v al u a tio n e r r o r s a n aly sis in a d e v elo pi n g r e al e s t a t e m a r k e t B affo u r Awu a h, KG a n d Gy a mfi-Yebo a h, F h t t p:// dx. d oi.o r g/ 1 0. 1 0 8 0/ 0 9 5 9 9 9 1 6. 2 0 1 7. 1 3 1 5 4 4 4 Ti t l eTh e r ol e of t a s k c o m pl exity in v al u a tio n e r r o r s a n aly sis in a d ev elo pi n g r e al e s t a t e m a r k e t A u t h o r s B affo u r Awu a h, KG a n d Gy a mfi-Yebo a h, F Typ e Articl e U RL This ve r sio n is a v ail a bl e a t : h t t p:// u sir.s alfo r d. a c. u k/id/ e p ri n t/ 4 4 5 3 1/ P u b l i s h e d D a t e 2 0 1 7 U SIR is a di git al c oll e c tio n of t h e r e s e a r c h o u t p u t of t h e U niv e r si ty of S alfo r d. W h e r e c o py ri g h t p e r mi t s, full t e x t m a t e ri al h el d in t h e r e p o si to ry is m a d e fr e ely a v ail a bl e o nli n e a n d c a n b e r e a d , d o w nlo a d e d a n d c o pi e d fo r n o nc o m m e r ci al p riv a t e s t u dy o r r e s e a r c h p u r p o s e s . Pl e a s e c h e c k t h e m a n u s c ri p t fo r a n y fu r t h e r c o py ri g h t r e s t ri c tio n s. Fo r m o r e info r m a tio n, in cl u di n g o u r p olicy a n d s u b mi s sio n p r o c e d u r e , pl e a s e c o n t a c t t h e R e p o si to ry Te a m a t: u si r@ s alfo r d. a c. u k .The real estate valuation literature on Sub-Saharan Africa (SSA) shows a growing concern over valuation errors especially wide variation in valuations. Although there have been increased business and investment activities in the last decade or more in the region, these valuation errors pose a challenge to the maturity of SSA real estate markets as valuations promote transparency and support efficient operation of property markets. Based on archival and survey data, as well as insights from the task complexity discourse, this study examines the extent of variations in valuations and the effect of complex valuation tasks on the levels of the variations in Ghana. The study finds high levels of variations in valuation opinions of 33.6% and 63% for the archival and survey data respectively. These levels of variations are substantially higher than have been reported in the literature for advanced markets suggesting that the concerns of valuation errors in SSA may be well grounded. Consistent with theory, it is further established that variations in valuation opinions may be more pronounced in comparatively more complex assignments. These findings have several implications including possible loss of confidence of market players in valuations, heightening of market uncertainty and increase in transaction costs.