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Paper eres2003_158:
The Uncertainty of Valuation

id eres2003_158
authors French, Nick; Gabrielli Laura
year 2003
title The Uncertainty of Valuation
source 10th European Real Estate Society Conference (10-13 June 2003) Helsinki, Finland
summary Valuation is often said to be žan art not a scienceÓ 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. 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.
keywords Normal Uncertainty; Abnormal Uncertainty; Market Value; and Valuation
series ERES:conference
discussion No discussions. Post discussion ...
session Session 3, Uncertainty in Valuations
last changed 2008/12/29 19:09
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