The Magnitude of Random Appraisal Error in Commercial Real Estate Valuation

Richard Graff and Michael Young

Journal of Real Estate Research, 1999, vol. 17, issue 1, 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.

Date: 1999
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DOI: 10.1080/10835547.1999.12090966

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