A model of behavioural uncertainties influencing property valuation decision making

Abstract

Valuation is often to be said of combination "an art and science". However, it is well known that valuation is more of an "art" than science in regards which no two valuers could perhaps arrive at the same value, and the disparities in the valuation results pose a point of concern. The disparities in the valuation results exist due to the behavioural uncertainties occur during property valuation decision making. There are six (6) factors of behavioural uncertainties been recognized globally include heuristic and bias, ethical conduct, client influence, valuer's experience and knowledge, availability and accuracy of market data as well as negligence and professionalism. These factors have critically influenced the property valuation decision making of which valuers and Board of Valuers, Appraisers, Estate Agents and Property Managers, Malaysia (BOVAEP) should be aware of. Though property valuation has its own substantial and growing research on 'science' methodological analysis, however its 'art' (behavioural) property valuation uncertainties are often neglected or still in its infancy. In Malaysia, there is a lack of research that has been undertaken to examine the behavioural uncertainties in property valuation decision making holistically. There were few studies done on several factors of behavioural uncertainties that influence valuation judgment. Therefore, this study aims to develop a model of behavioural uncertainties’ factors (relationship) and property valuation decision making which resulted in valuation inaccuracy from Malaysian context encompasses all identified behavioural uncertainties globally. To achieve research aim, this study has adopted both quantitative and qualitative through the distribution of survey involving public and private registered valuer of Klang Valley, Johor, Malacca and Penang recognized under the Board of Valuers, Appraisers, Estate Agents and Property Managers, Malaysia (BOVAEP). The data were analysed through the Confimatory Factor Analysis (CFA) prior to conduct Structural Equation Modeling (SEM) procedure. The results from the quantitative study then were validated by registered valuers through a feedback in a qualitative study and were analysed through Coding Analysis. The findings show that the most significant factors of behavioural uncertainties which influencing property valuation decision making are heuristic and bias, ethical conduct, client influence, valuer's experience and knowledge as well as negligence and professionalism. The proposed model provides valuable information on the behavioural uncertainties that significantly influence property valuation decision making, which the property valuers and other property market players should take into consideration in valuation process for reliable and defendable at end results. The significant behavioural uncertainties that are exhibited in the model were identified as strongly correlated to each other and considered to be significant factors in the property valuation decision making which encompasses five behavioural uncertainties’ factors from Malaysian context.