UK recurring portfolio appraisals: development of a conceptual model

Clayton et al. (2001) and Van der Werf and Huibers (2015) showed that first-time appraisals differ from their successive repeat valuations in Canada and The Netherlands. First-time appraisals seem to follow the normative valuation process more closely and use more contemporary comparable data. Repeat valuations tend to be sluggish and tend to anchor on the prior valuation. In bearish, contracting markets this leads to assessed values that, on average, are higher than the unobservable market value.In the UK context there has not been similar research into first time appraisals thus far, although evidence of anchoring to either selling price (Gallimore and Wolverton, 2008) or previous estimated (Havard, 1999; Havard, 2001) in the UK context exists. The concept of recurring valuations and the effect of possible anchoring on the assessment of market value has been researched as well (Gallimore and Wolverton, 2008; Diaz and Hansz, 1997; Hansz, 2004; McAllister et al., 2003; Crosby, Lizieri and McAllister, 2010), though, as far as we know, no study has examined the rotation of appraisers specifically to understand what processes are occurring when a new appraising firm is being appointed or assets rotate between a number of appraising firms.Based on interviews, combined with literature review a conceptual model has been developed to describe the processes that take place when appraisers are undertaking either first-time or repeat valuations. Potential weak spots have been revealed that are vulnerable for biases. Further analysis of these weak spots could potentially lead to less valuation bias.