An investigation into the expression of uncertainty in property valuations

Abstract

Purpose

Valuation is a “snapshot” in time. It is an assessment of the market price at a single point in time. It is an estimate and any estimate is uncertain. This paper aims to investigate how the property profession conveys this uncertainty to their clients. Uncertainty must be dealt with in a professional manner in order to offer a reputable service to the general public. It is argued that uncertainty must be expressed within the valuation to offer each party a thorough understanding of the circumstances that surround that particular valuation. It is suggested that the Royal Institution of Chartered Surveyors (RICS) should develop a standard approach to uncertainty expression, not only for the valuer's peace of mind, but in order to offer the best possible service to the general public.

Design/methodology/approach

The paper reports the findings of a survey of valuers from leading practices throughout the UK. Examples of uncertainty are included in order to highlight the key issues within the discussion.

Findings

The concept of uncertainty within a valuation is poorly understood and is rarely conveyed to the client in any coherent form.

Originality/value

“What additional information does one need a valuer to provide, apart from the figure of his valuation?” In the majority of cases, the valuer's expression of uncertainty is integral, whereby one must express the amount of uncertainty present when undertaking a valuation. In order to offer a client an accurate valuation, the valuer should make clear the background to the value presented and offer evidence about which factors may affect the figure, with regard to variation.

Citation

Joslin, A. (2005), "An investigation into the expression of uncertainty in property valuations", Journal of Property Investment & Finance, Vol. 23 No. 3, pp. 269-285. https://doi.org/10.1108/14635780510599476