Valuation Bias in Commercial Appraisal: A Transaction Price Feedback Experiment

Valuation Bias in Commercial Appraisal: A Transaction Price Feedback Experiment Experiments were conducted to test the hypothesis that transaction price feedback may bias valuation judgment. Among participating appraisers, evidence of asymmetrical response was found. The group receiving transaction feedback indicating that current judgments were “too low” responded with judgments in subsequent, unrelated valuations that were significantly higher than the group that received no feedback. The response from “too high” feedback was in the expected direction (lower value judgments) but was not significant. Additionally, valuation dispersion of around 10% revealed in these experiments is consistent with studies of valuation variability and may reflect an upper bound of typical commercial appraisal dispersion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Real Estate Economics Wiley

Valuation Bias in Commercial Appraisal: A Transaction Price Feedback Experiment

Real Estate Economics, Volume 29 (4) – Apr 1, 2001

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Publisher
Wiley
Copyright
2001 by the American Real Estate and Urban Economics Association
ISSN
1080-8620
eISSN
1540-6229
DOI
10.1111/1080-8620.00022
Publisher site
See Article on Publisher Site

Abstract

Experiments were conducted to test the hypothesis that transaction price feedback may bias valuation judgment. Among participating appraisers, evidence of asymmetrical response was found. The group receiving transaction feedback indicating that current judgments were “too low” responded with judgments in subsequent, unrelated valuations that were significantly higher than the group that received no feedback. The response from “too high” feedback was in the expected direction (lower value judgments) but was not significant. Additionally, valuation dispersion of around 10% revealed in these experiments is consistent with studies of valuation variability and may reflect an upper bound of typical commercial appraisal dispersion.

Journal

Real Estate EconomicsWiley

Published: Apr 1, 2001

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