Valuation Bias in Commercial Appraisal: A Transaction Price Feedback Experiment |
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| Authors: | J Andrew Hansz & Julian Diaz III |
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| Institution: | Department of Finance and Real Estate, College of Business Administration, University of Texas,;Department of Real Estate, Robinson College of Business, Georgia State University, Atlanta |
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| 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. |
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