The influence of market feedback on the appraisal process

The normative real estate valuation model does not take into consideration interactions with the environment in the form of redundancy (prior experience) and feedback. Environmental feedback is important to expertise development because it provides information needed to compare actual to ideal performance and is used as a benchmark to modify cognitive processes. The market provides valuation feedback to appraisers in the form of transaction prices. Normatively, subsequent knowledge of a deviation from transaction price should not influence the appraiser's next valuation opinion on a different property.; The focus of this study is on market valuation feedback after the appraisal has been completed. The question asked is “What impact does market valuation feedback have on the appraisal process?” To investigate this question, forty (40) real estate appraisers participated in a controlled experiment.; The experimental results indicate that market valuation feedback may influence the valuation process, as two treatment groups (each receiving either high valuation feedback or low valuation feedback) produce significantly different valuation estimates. However, when the control group (no valuation feedback) is considered, the relationship between valuation feedback (high or low) does not appear to be a simple linear relationship with appraisers giving equal weight to both high and low valuation feedback. The control group, no valuation feedback, falls close to the high valuation feedback treatment group with no significant statistical difference between these two groups. The relatively large difference between the no valuation feedback control group and the low valuation feedback treatment group was found to be significantly different at the 5% and 10% levels for the parametric and non-parametric tests, respectively. The positioning of the no valuation feedback control group between the two treatment groups indicates that the appraisers placed more weight on “low” valuation feedback and low valuation feedback appears to be the bias inducing form of market valuation feedback.; This study contributes to the existing behavioral real estate literature by employing a continuous valuation problem to study the effects of valuation feedback on the appraisal process. This study also contributes to the general literature by observing how expert problem solvers respond to a common form of environmental feedback.