The Magnitude of Random Appraisal Error in Commercial Real Estate Valuation

Richard A. Graff and Michael S. Young ()
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Richard A. Graff: Electrum Partners 400 North Michigan Avenue Suite 1200 Chicago, Illinois 60611, http://www.cbe.wsu.edu/~fire/

Journal of Real Estate Research, 1999, vol. 17, issue 1, pages 33-54

Abstract: Analysis of more than seven hundred pairs of simultaneous independent appraisals of institutional-grade commercial properties shows that the standard deviation of the random component of appraisal error is approximately 2%. Random appraisal error appears constant across both time and the institutional-grade investment universe, except during infrequent periods of real estate market gridlock. Most appraisal error is deterministic in nature, even though it usually appears random in routine cross-sectional analysis. Such appraisal error can be constrained and reduced by investment management control systems.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1999
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