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

Abstract

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.

An updated survey of factors influencing property valuation accuracy in Australia

“…This study investigates the factors responsible for the inaccuracy of property valuations in the Australian property market. Considering the complex and dynamic nature of property valuations (Amidu and Boyd, 2018; Amidu et al , 2019), and a common perception that valuations are prone to some degree of errors (Hager and Lord, 1985; Brown, 1986; Hutchison et al , 1995; Crosby et al , 1998; Newell and Kishore, 1998; Hansz and Diaz, 2001; Babawale and Ajayi, 2011; Adegoke, 2016; Baffour-Awuah and Gyamfi-Yeboah, 2017), the literature on improving the performance of valuers is surprisingly limited. Property valuation is key to the efficient functioning of the property market in particular, and the economy in general.…”

A protocol analysis of use of forward and backward reasoning during valuation problem solving

“…For instance, the valuer’s task environment includes all market information such as comparable sales information, yields, pending sale prices, opinion from other experts and other market information. Often, these data are incomplete and/or inaccurate, leading to the complexity of valuation task environment (Baffour Awuah and Gyambi-Yeboah, 2017; Diaz and Hansz, 2002). The internal problem space, on the other hand, consists of the space that an individual problem solver has constructed (i.e.…”

“…The task for this research consisted of a simulated valuation in a commercial practice context. The researcher’s motive for investigating reasoning strategy in a commercial valuation practice is because the valuation of a commercial property is invariably complex, involving considerable judgment that requires the valuer to gather and integrate a large amount of information from multiple knowledge domains (Havard, 2001a, b; Baffour Awuah and Gyambi-Yeboah, 2017). Thus, the task could be characterised as fulfilling Simon’s (1973) definition of a highly ill-structured problem, which makes it an interesting focus for research on valuers’ reasoning strategy.…”

“…In a commercial property context, many of the tasks that comprise the process of the formulation of market valuation relate to provision of judgement and often require valuers to cope with unpredictable, non-routine and complex situations (French, 2011; Crosby et al , 2018; Klamer et al , 2017), where there may be multiple, or no predetermined, solution paths or uncertainty about which data, concepts and principles are relevant for the solutions (Baffour Awuah and Gyambi-Yeboah, 2017; Diaz and Hansz, 2007). In dealing with such situations, valuers are required by guidance and regulations to follow logical reasoning in their analysis.…”

Effects of Behavioural Uncertainties In Property Valuation

“…Such compounded behavioural uncertainties (biases) problems that lead to systematic errors are imperative to be tackled as they result in loss of investment and confidence of clients (Ayuthaya and Fredric, 2014;Baffour Awuah et al, 2017). The posed inaccuracy, unconvincing, and discrepancy issues of property valuation due to some of the above behavioural subjectivities and uncertainties are not foreign to Malaysia (Achu, 2013;Nasir, 2006), therefore leading to strong criticism that national valuation is claimed to be of poor quality and illogical (Ismail and Buyong 1998).…”