Authorised property appraisers’ perceptions of commercial property valuation
| Pages | 225-248 |
| Published date | 04 April 2016 |
| Date | 04 April 2016 |
| DOI | https://doi.org/10.1108/JPIF-08-2015-0061 |
| Author | Lina Bellman,Peter Öhman |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
Authorised property appraisers’
perceptions of commercial
property valuation
Lina Bellman and Peter Öhman
Department of Business, Economics and Law,
Centre for Research on Economic Relations,
Mid Sweden University, Sundsvall, Sweden
Abstract
Purpose –The purpose of this paper is to describe and analyze the thought patterns of authorized
property appraisers (APAs) when valuing commercial properties, and draw conclusions about their
collective thinking in terms of content, complexity, and homogeneity.
Design/methodology/approach –A standard set of value-addingfactors and bipolar constructswas
included in a grid form used for datacollection. The repertory grid technique and principal component
analysis were used to map and analyze the thought patterns of nearly half of the APAs inSweden.
Findings –Analysis of the mean grid for all respondents revealed three dimensions in the aggregated
APA thought pattern: property object –property market focus, abstract –specific information, and
expert –superficial assessments. The aggregated thought pattern was found to be moderately
complex, and the APAs demonstrated relatively strong homogeneity in their thought patterns.
Practical implications –Based on the moderate complexity and relatively strong homogeneity in
respondent thought patterns, this study discusses the upcoming establishment of a profession.
Originality/value –To the authors’best knowledge, this is the first study using the repertory grid
technique to map and analyze APA thought patterns at an aggregated level.
Keywords Authorized property appraisers, Commercial properties, Repertory grid technique,
Thought patterns, Valuation judgements, Value-adding factors
Paper type Research paper
1. Introduction
Behavioural property research is rooted in Newell and Simon’s (1972) work on human
information processing and problem solving, which demonstrated that individuals
cannot make perfectly rational decisions. The human memory and problem-solving
capacity are limited, leading to a condition of bounded rationality (Simon, 1957).
In other words, individuals or groups of individuals use cognitive shortcuts and rules
of thumb to simplify their decision-making (Bonner, 2008, p. 160).
Behavioural property studies have largely focused on distortions of property
appraisers’value statements, i.e. appraisal bias (e.g. Diaz, 1999). Investigations have
considered whether property appraisers anchor their assessments in previously executed
appraisals (Diaz, 1990; Diaz and Hansz, 1997, 2001), the stated purchase price of property
or comparison objects (Black, 1997; Diaz et al., 1999; Northcraft and Neale, 1987), and the
pending sale price (Gallimore and Wolverton, 1997). Other sorts of anchoring are valuation
judgements based on emotional reactions rather than on calculations of risks and benefits
and the tendency to focus on recent events (i.e. the recency effect) (Gallimore, 1994).
Studies have also highlighted client impact on property appraisers’value statements
(Amidu et al., 2008; Kinnard et al., 1997; Levy and Schuck, 1999, 2005; Nwuba et al., 2015).
How individuals make assessments and decisions depends on how they perceive
reality and how their thought patterns are constructed. Previous research has found
Journal of Property Investment &
Finance
Vol. 34 No. 3, 2016
pp. 225-248
©Emerald Group Publis hing Limited
1463-578X
DOI 10.1108/JPIF-08-2015-0061
Received 27 August 2015
Revised 25 November 2015
Accepted 24 December 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
225
APAs
perceptions
variation in property appraisers’valuations due to cultural differences (Gallimore and
Wolverton, 1997). Hofstede et al. (2010) describe culture as a social game of unwritten
rules observable in practices (i.e. symbols, heroes, and rituals) and values. Cultural
differences are expressed in collective thinking that distinguishes members of one
group from members of other groups in terms of meaning, habits, traditions, and norms
(Schein, 2010). Within organizations, the culture consists predominantly of practices
acquired at the workplace or within the organization (Hofstede et al., 2010). However,
Page (2005) notes that there is a lack of studies of property appraisers’socialization.
Appraisers gather, analyze, and interpret various kinds of information during the
appraisal process, resulting in valuation judgements (Tidwell and Gallimore, 2014).
McParland et al.’s (2002)comparative study demonstrates that property appraisers from
four European countries –i.e., France, Germany, the Netherlands,and Sweden –work in
similar ways. In Sweden, the quality assurance of property appraisers is handled by
Samhällsbyggarna, a non-political and non-profit property organization that has
authorized property appraisers (APAs) since 1993. APAs are assumed to follow general
valuation principles and good practice, and to apply Samhällsbyggarna’s code of ethics.
Moreover, McParland et al. (2002) demonstrate that many Swedish APAs use cash flow
analysis as the main valuation method, in line with Swedish Annual Property Index
valuation guidelines. Most property values are reported annually to this index, whose
guidance has become a de facto standard in Sweden (Öhman et al.,2012).However,the
socialization process of Swedish APAs has been in place for only a relatively short
period, and APAs are not as highly socialized as are members of strongly
institutionalized professions such as auditors (Öhman, 2015).
This study contributes to the behavioural property literature by capturing APAs’
perceptions when assessing various value-adding factors during commercial property
valuation. Value-adding factors have seldom been examined in light of various
perceptions of them; to do so, this study draws on Kelly’s (1955) personal construct
theory and uses the repertory grid technique. A key assumption underlying personal
construct theory is that how a person perceives an entity –e.g. act, event, person, place,
thing, or object –determines how he or she behaves in relation to it (Fransella
et al., 2004; Wright and Lam, 2002). Moreover, a person uses bipolar constructs to
attribute meaning to that entity (Kelly, 1955). In the present study, perceptions of value-
adding factors are analyzed in light of several bipolar constructs. In the property
appraiser context, we found no study using the repertory grid technique holistically
and comprehensively. However, the repertory grid technique has been used in
other contexts to map thought patterns at the individual as well as aggregated levels
(e.g. Bell, 2000; Rad et al., 2013; Wright, 2004, 2006; Öhman et al., 2006).
The present study seeks to map APA thought patterns and to analyze the resulting
maps. It also seeks to conduct the same analysis at an aggregated level to investigate
how Swedish APAs perceive commercial property valuation.
The remainder of the paper is structured as follows: the next section presents the
data collection and data analysis, including the pilot study. The 13 value-adding factors
and the 17 bipolar constructs used in the present study are then described. After that,
the findings are presented, followed by a concluding discussion.
2. Method
2.1 Study context and sample
The Swedish property market is relatively transparent, characterized by the consistent
application of laws and regulations and respect for private property rights.
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