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The reporting of risk in real estate appraisal property risk scoring
Alastair Adair
School of the Built Environment, University of Ulster, Newtownabbey, UK, and Norman Hutchison
Department of Property, University of Aberdeen Business School,
Aberdeen, UK
Purpose – Aims to examine financial risk management. The UK valuation profession has beencriticised for inconsistencies and failures to reflect risk and uncertainty in certain valuationassignments such as 英国论文网the pricing of urban regeneration land. Also the Investment Property
Forum/Investment Property Databank specifically concluded that a new approach is needed whichcombines conventional analysis of returns uncertainty with a more comprehensive survey of businessrisks. This debate has been brought into sharper focus by the publication of the Carsberg Report,which emphasised the need for more acceptable methods of expressing uncertainty, particularly when
pricing in thin markets.Design/methodology/approach – The paper commences with an examination of risk analysiswithin investment decision making and the property industry, drawing on the findings of the mostrecent literature that assesses the utilisation of risk management approaches.Findings – Financial risk management is examined and the workings of the D&B credit rating modelillustrated. The paper explains the decision-making framework within which the property risk score is
Originality/value – The aim of this paper is to present an alternative paradigm for the reporting of
risk based on techniques utilised within business applications. In particular it applies a standard
credit-rating technique, based on the D&B model, to report the level of risk within property pricing –
property risk scoring (PRS).
Keywords Uncertainty management, Risk management, Real estate, Asset valuation, Property,Market value
Paper type Literature review
1. Introduction
Risk and uncertainty are inherent parts of the valuation process as often the valuer isunable to specify and price accurately all current and future influences on the value ofthe asset. While the final single point estimate of value may become a statement of factin the minds of the users of the valuation it nevertheless remains the opinion of anexpert. Indeed the large number of academic and practice based studies into valuationvariance confirm the subjective nature of property asset pricing (Adair et al., 1996). Inthose circumstances where risk and uncertainty are reported according to the RICSAppraisal and Valuation Manual (RICS, 1996) or Red Book the valuer can claim, withsome justification, that best practice has been satisfied. However, despite suchprescribed standards the profession has been criticised for inconsistencies and failuresThe Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available to reflect risk and uncertainty in certain valuation assignments such as the pricing ofurban regeneration land (Syms, 1996). In addition the Investment Property

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