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Means, Motive and Opportunity? Disentangling Client Influence on Performance Measurement Appraisals

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  • Neil Crosby
  • Colin Lizieri
  • Patrick McAllister

Abstract

There is a longstanding body of literature that discusses the potential for clients to influence the outcome of the property appraisal process. In the market downturn of 2007-9, it is clear from a number of practitioner conferences and articles that some market participants such as investment agents or fund managers are sceptical about the ability of real estate appraisers to produce valuations that record ad reflect accurately the timing and extent of market price changes (see, for example, EG Capital, 2008; IPE Real Estate, 2009) It is also apparent from the same sources that different types of investors may have different motivations to attempt to influence appraisers. For example, due to their requirement to provide liquidity, open-ended real estate funds have major incentives to ensure that the appraisals of their property assets accurately reflected current market levels. Evidence of runs on the funds in Germany in 2006 and the UK in 2007/2008 can be partly attributed to perceptions of over valuation of the units. As a result, their major motivation is to ensure that appraisals reflected current market conditions. On the other hand, closed-ended funds, investment institutions and REITs/property companies, who did not have similar pressures to meet investor redemptions might to be much more resistant to downward adjustment in valuations without strong supporting evidence from transactions. In order to shed some light on the ability of clients to influence the outcome of their appraisals, in this paper, using data from IPD for the UK universe and with a particular focus on the latter half of 2007, we analyse the patterns in the changes in their appraisal-based returns for different investor types.

Suggested Citation

  • Neil Crosby & Colin Lizieri & Patrick McAllister, 2009. "Means, Motive and Opportunity? Disentangling Client Influence on Performance Measurement Appraisals," ERES eres2009_159, European Real Estate Society (ERES).
  • Handle: RePEc:arz:wpaper:eres2009_159
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2009-159
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    References listed on IDEAS

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    1. Neil Crosby & Cathy Hughes & John Murdoch, 2004. "Influences on secured lending property valuations in the UK," ERES eres2004_116, European Real Estate Society (ERES).
    2. Neil Crosby & Cathy Hughes & John Murdoch, 2004. "Influences on Secured Lending Property Valuations in the UK," Real Estate & Planning Working Papers rep-wp2004-04, Henley Business School, University of Reading.
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    Cited by:

    1. Chihiro Shimizu & W. Erwin Diewert & Kiyohiko G. Nishimura & Tsutomu Watanabe, 2015. "Estimating quality adjusted commercial property price indexes using Japanese REIT data," Journal of Property Research, Taylor & Francis Journals, vol. 32(3), pages 217-239, September.
    2. Erwin Diewert & Chihiro Shimizu, 2020. "Alternative Land‐Price Indexes for Commercial Properties in Tokyo," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(4), pages 784-824, December.
    3. Neil Crosby & John Henneberry, 2016. "Financialisation, the valuation of investment property and the urban built environment in the UK," Urban Studies, Urban Studies Journal Limited, vol. 53(7), pages 1424-1441, May.
    4. Agnieszka Małkowska & Małgorzata Uhruska & Mateusz Tomal, 2019. "Age and Experience versus Susceptibility to Client Pressure among Property Valuation Professionals—Implications for Rethinking Institutional Framework," Sustainability, MDPI, vol. 11(23), pages 1-23, November.
    5. Neil Crosby & Steven Devaney & Colin Lizieri & Patrick McAllister, 2018. "Can Institutional Investors Bias Real Estate Portfolio Appraisals? Evidence from the Market Downturn," Journal of Business Ethics, Springer, vol. 147(3), pages 651-667, February.
    6. Hsueh-Fei Liao & Nan-Yu Chu & Chien-Wen Peng, 2018. "Awareness of Independence of Real Estate Appraisers: An Empirical Analysis," International Real Estate Review, Global Social Science Institute, vol. 21(3), pages 295-316.
    7. Alexandru Tugui & Daniela Tatiana Agheorghiesei & Laura Asandului, 2020. "An Informal Ethics Auditing in Authorized Valuation for Business Sustainability in Romania," Sustainability, MDPI, vol. 12(20), pages 1-26, October.
    8. Steven Devaney & David Scofield, 2015. "Liquidity and the drivers of search, due diligence and transaction times for UK commercial real estate investments," Journal of Property Research, Taylor & Francis Journals, vol. 32(4), pages 362-383, December.
    9. W. Erwin Diewert & Kiyohiko G. Nishimura & Chihiro Shimizu & Tsutomu Watanabe, 2020. "The System of National Accounts and Alternative Approaches to the Construction of Commercial Property Price Indexes," Advances in Japanese Business and Economics, in: Property Price Index, chapter 0, pages 181-219, Springer.
    10. Irene Cheloti & Manya Mooya, 2021. "Valuation Problems in Developing Countries: A New Perspective," Land, MDPI, vol. 10(12), pages 1-20, December.
    11. Patrick McAllister & Emma Street & Peter Wyatt, 2016. "Governing calculative practices: An investigation of development viability modelling in the English planning system," Urban Studies, Urban Studies Journal Limited, vol. 53(11), pages 2363-2379, August.

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    2. Agnieszka Małkowska & Małgorzata Uhruska & Mateusz Tomal, 2019. "Age and Experience versus Susceptibility to Client Pressure among Property Valuation Professionals—Implications for Rethinking Institutional Framework," Sustainability, MDPI, vol. 11(23), pages 1-23, November.
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    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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