Journal of Property Investment & Finance

An investigation into the expression of uncertainty in property valuations

Alexander Joslin
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Alexander Joslin, (2005),"An investigation into the expression of uncertainty in property valuations", Journal
of Property Investment & Finance, Vol. 23 Iss 3 pp. 269 - 285
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PRACTICE BRIEFING Practice

briefing
An investigation into the
expression of uncertainty in
269
property valuations
Alexander Joslin
Savills Commercial Ltd, London, UK

Abstract
Purpose – Valuation is a “snapshot” in time. It is an assessment of the market price at a single point
in time. It is an estimate and any estimate is uncertain. This paper aims to investigate how the
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property profession conveys this uncertainty to their clients. Uncertainty must be dealt with in a
professional manner in order to offer a reputable service to the general public. It is argued that
uncertainty must be expressed within the valuation to offer each party a thorough understanding of
the circumstances that surround that particular valuation. It is suggested that the Royal Institution of
Chartered Surveyors (RICS) should develop a standard approach to uncertainty expression, not only
for the valuer’s peace of mind, but in order to offer the best possible service to the general public.
Design/methodology/approach – The paper reports the findings of a survey of valuers from
leading practices throughout the UK. Examples of uncertainty are included in order to highlight the
key issues within the discussion.
Findings – The concept of uncertainty within a valuation is poorly understood and is rarely
conveyed to the client in any coherent form.
Originality/value – “What additional information does one need a valuer to provide, apart from the
figure of his valuation?” In the majority of cases, the valuer’s expression of uncertainty is integral,
whereby one must express the amount of uncertainty present when undertaking a valuation. In order
to offer a client an accurate valuation, the valuer should make clear the background to the value
presented and offer evidence about which factors may affect the figure, with regard to variation.
Keywords Uncertainty management, Assets valuation, Market value
Paper type General review

Introduction
In 1994, the Royal Institution of Chartered Surveyors (RICS) published the Mallinson
Report (RICS, 1994). The main content of the report was to assess the, then, current
valuation practices and to recommend a number of changes that would allow the
valuer to offer an enhanced service to the client.
The Mallinson Report was a response to the general criticism, post the property crash
of the late 1980s, that valuations in many cases have been unsupported and insubstantial.
A valuation is a “snapshot” in time and is an estimate of market price. As such, it is
uncertain. Unless a property is actually sold to determine market price, any estimate is Journal of Property Investment &
uncertain. The role of the valuer is to assess current market conditions and from a “sea Finance
Vol. 23 No. 3, 2005
of uncertainty” produce a single judgement (RICS, 1994, p. 14). Depending on both the pp. 269-285
property and the market, valuers will be more or less certain about the valuation. A q Emerald Group Publishing Limited
1463-578X
valuation is based on probability of outcome and the corollary of this is uncertainty of DOI 10.1108/14635780510599476
 JPIF output, the valuation figure. Recommendation 34 of the Mallinson report specifically
23,3 addressed this issue by stating:
Common professional standards and methods should be developed for measuring and
expressing price trends and expressing uncertainty.
How should probability or uncertainty be expressed? The Mallinson Report concluded
270 that in most cases an indication of valuation variability is favoured within the context
of a single figure of valuation.
One of the principal criticisms that was addressed by the Mallinson Report was that
valuers generally failed to provide credible explanations of the valuation figure. They
were reluctant to give crucial background information such as market assumptions or
the dynamics of the market at the time of the valuation. A response to this failing
would be to introduce a set standard for the expression of uncertainty. French and
Mallinson (2000), argued that these failings would be overcome if valuers had a
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common technique for reporting uncertainty:

The solution must lie in the creation of some format description, accepted as a norm, which
conveys the essence with simplicity, but is capable of expansion and interpretation. This
would need to be presented in a prescribed professional standard, and would always be
appended to the valuation figure.
It would appear obvious that the industry needs to strive to make the expression of
uncertainty part of the valuation process, not something that is merely mentioned at
the end of a conversation of dropped subtly into a meeting summary. If action is to be
taken, the subject area must be thoroughly investigated and a plan of action devised.
The most recent study relating to property valuation was the RICS Carsberg Report
(RICS, 2002a). Like the Mallinson Report, the Carsberg Report raises issues and
concerns about the industry and finally makes a number of recommendations.
Recommendation 15, refers to uncertainty and reads:
RICS should commission work to establish an acceptable method by which uncertainty could
be expressed in a manner which will be helpful and will not confuse users of the valuation.
RICS should also seek to agree with appropriate representative bodies of those
commissioning and using third party valuations the circumstances and format in which
the valuer would convey uncertainty.
In the formal response to the Carsberg Report (RICS, 2002b), it was stated:
At present, the valuer can readily express this [uncertainty] to a single client, but there is no
robust and understood mechanism for him to do so. . . therein lies the scope for misunderstanding.
The RICS feels unable to recommend a particular method for reporting uncertainty around the
single valuation estimate, but it considers that clients deserve more information than they
normally receive at present.
This response would suggest that individual valuers must take the issue into their own
hands and offer the client what they feel is their best price estimate.
The subject of expressing uncertainty is a complex topic and there are many
arguments for and against it, however it is now well established that it plays an
important role in valuation. One must consider the client’s needs and the importance of
being told not only the valuation, but also the factors that impact on the valuation.
 The research Practice
This research project, “Uncertainty expression in valuations” is an extension of the
work carried out in the RICS Mallinson Report and will primarily answer the following
briefing
questions:
.
What exactly is uncertainty pertaining to valuations?
. How should uncertainty be categorised?
271
.
How should uncertainty be expressed?
.
Should there be a universal approach to the expression of uncertainty?
.
Should the expression of uncertainty be a mandatory act?
.
Can and should a client accept a professional’s view on uncertainty?
The principal aim of the research project is to get an insight into the risk involved in
commercial property valuations and how valuers currently address the issue in their
valuation reports.
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Uncertainty in valuation
What is uncertainty? “There are optimistic valuers and there are pessimistic valuers”
(Brett, 1990, p. 60). In other words not everyone would put the same value on
something; valuation is a personal opinion and can vary from valuer to valuer. Scarrett
(1991, pp. 113 – 14), states:
The valuer aims for accuracy in valuation although it is well accepted that valuation is based
on interpretation and opinion, and the view of one competent valuer is not necessarily the
same as that of another equally competent valuer.
This suggests that in general everybody associated with valuation, whether a valuer or
client, knows of the inherent risk of valuation. Principally the valuer must offer an
explanation within the valuation report, which would contain an expression of
uncertainty surrounding the particular case.
“Identifying uncertainty is not an escape route from responsibility” (RICS, 1997, p. 26).
It is merely the valuer’s way to explaining that the outcome is not an exact figure of value
and could be subject to increase or decrease depending on market performance.
There are three principal ways of dealing with the issue of uncertainty (Enever and
Isaac, 2002):
(1) ignore it;
(2) express it verbally; and
(3) express it numerically.
The most obvious explanation of uncertainty is a clause before or after the valuation
figure explaining the outcome is subject to market conditions at the time of sale. Indeed, in
the 2003 edition of the RICS Appraisal and Valuation Standards (Red Book), UK Guidance
Note 5 address the issue of uncertainty in valuation. In this guidance it states that:
All valuations are opinions of the price that would be achieved at the valuation date. The
degree of certainty will vary significantly. These variations can arise because of the inherent
features of the property, the market place or the in the information available to the valuer.
Where uncertainty could have a material effect on the valuation, the valuer should draw
attention to this, indicating the cause of the uncertainty and the degree to which this is
reflected in the reported valuation.
 JPIF Yet, contrary to the recommendations of Mallinson and Carsberg, there is no suggestion
23,3 of a standard way of reporting this uncertainty to the client. By inference, the Guidance
note is suggesting that the valuer reports uncertainty in valuation to the client in a form
of words within the report but it does not suggest an acceptable form of words nor any
prescribed format for the measurement of the said uncertainty. For a full discussion on
the possible forms for expressing uncertainty in valuations, see French and Gabrielli
272 (2004, 2005). This paper concentrates on a survey of valuers in the UK to determine how
valuers currently express valuation uncertainty in their valuation reports.

Questionnaire survey
A questionnaire survey of 100 valuers in the UK was undertaken in the summer of
2003. The survey was divided geographically and by size of company. The areas of
study chosen were areas which have witnessed major property value fluctuations
within the preceding 12 months. These areas were:
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.
North East England;
.
Edinburgh, Scotland;
.
South East;
.
South West England; and
.
London.
Firms and individuals were divided into three main categories:
(1) Small – individual, 1-5 members of staff.
(2) Medium – 5-50 members of staff.
(3) Large – 50 þ members of staff.
The questionnaire universe was divided equally between each category in order to get
a broad view from the industry’s professionals. A total of 100 questionnaires were sent
out and five one-to-one interviews carried out.

The questionnaire
.
Do you think it is possible for a valuer to be totally accurate to open market sale
price?
.
Do you feel that there is uncertainty present during valuations? What factors
affect a valuations certainty?
.
Do you, as an individual or company express uncertainty?
.
If so, how do you express this uncertainty? (Personal comment) Does your firm
have a standard form of expression?
.
Valuations are only as accurate as the evidence on which they are based. Do you
feel it is possible to get sufficient evidence in any particular case to have a totally
accurate valuation? Why?
.
What happens when there is no real evidence? Does one rely on assumptions?
.
A valuation is a valuer’s estimate of value, subject to a set of assumptions. Which
types of assumptions have to be made during valuations? Do you think they
should be standardised by the RICS or valuation forum?
 .
How accurate are your valuations? (Personal comment). Practice
.
Have you ever had a client(s) complain about a valuation’s accuracy? If so, why? briefing
.
Do you think that there is adequate support on expressing uncertainty in
valuations, for instance from the RICS? Why?
.
Do you feel it is acceptable to express valuations within a certain tolerance, such
as 5 per cent, 10 per cent or 15 per cent? If so, should this be standardised 273
throughout the industry?
.
Would you like to see more guidance on the expression of uncertainty in
valuations available from the RICS? Why?
The questions above produced both “qualitative” and “quantitative” data. The
“qualitative” data consists mainly of key quotes taken from the interviews and
questionnaires indirect questions, which asked for a comment rather than a simple
“yes” or “no”. They are compared and contrasted with the results from the quantitative
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analysis to give a general overview in the analysis.

The “quantitative” data is principally an opinion put into a numeric presentation
model; this would be in response direct, yes or no type questions in a questionnaire or
during an interview. A pie type graph clearly reveals any patterns and obvious trends.
These results are compared with the qualitative results during the analysis. The
quantitative data is classed as nominal or categorical data (classification) and ranked
or ordinal data (comparison).

Question 1
Do you feel it is possible for a valuer to be totally accurate to open market sale price? –
Quantitative (yes/no)
Figure 1 shows clearly that the majority of the candidates are realistic and do not
feel valuers are able to be totally accurate with 83 per cent of candidates indicating
“No”. This does not mean to say a valuer cannot be accurate in the slightest, it just
means that 100 per cent accuracy is almost impossible. This is a significant result
because the uncertainty has to be expressed.
It is interesting to point out that two of the candidates that indicated yes to being
totally accurate work for the same company, under different names and at different
locations.

Figure 1.
 JPIF Question 2a
23,3 Do you feel that there is uncertainty present during valuations? – Quantitative (yes/no)
The results for this question are very convincing; with every candidate indicating
that there is definitely uncertainty present during valuations (see Figure 2).

Question 2b
274 Factors that affect a valuations certainty:
(1) Comparable evidence:
.
quantity and quality of comparable evidence;
.
differing views on comparable evidence, differing availability of comparable
evidence;
.
uncertainty will arise where there is a lack of comparable evidence. . .;
.
values are all variable . . . comparables available;
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.
. . . the quality of the bare data provided (e.g. full lease, title documentation,
accurate floor plans, etc), comparable evidence. . .; and
.
the value of a property is emotive and can only be based on comparable
evidence. If a valuer does not have experience or comparisons, they are not
able to value accurately.
(2) Market condition:
.
supply and demand also affect uncertainty; and
. changing markets, market confidence and perception of change.
(3) Unusual/unique property:
.
. . . when dealing with unusual or unique property. . .; and
.
unusual nature of a property.
(4) Particulars:
.
size, condition, location. . .; and
.
plans for development around the property.

Figure 2.
 (5) Valuer’s opinion: Practice
. the valuer’s perception of a property’s pros and cons will vary; briefing
.
valuations are based on opinion therefore quite subjective and open to error;
and
.
market value (MV) assumptions under Red Book do not always reflect market.
The results of the data collection would suggest that the range of comparable evidence 275
available is the most common factor to affect a valuations certainty. Over 75 per cent of
the candidates mentioned that comparables were a major factor. This is deemed to be
the most logical method of valuation and is widely used within the industry, however
“. . . the valuer will not be 100 per cent certain of the impact of the input [variables]
figure” (French and Mallinson, 2000), so uncertainty is present from the beginning.
What happens when there are little or no comparables available? If this is the case
there is normally a lack of reliable, comparable transactional evidence, thus the valuer
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must use his professional expertise and experience to overcome this problem, this
usually takes the form of realistic assumptions. Market conditions are constantly
changing, these uncertainties will vary according to the “. . . level of market activity;
the more active a market, the more credence will be given to the input information”
(French and Mallinson, 2000).
In the world of valuation there are different companies that deal with different types
of property, such as residential agents, fine art auctioneers and agricultural land agents.
When valuing, whether for sale, purchase, insurance purposes or just out of interest the
end figure is affected by another market force which is commonly known as “demand”.
Demand is closely related to a property’s particulars, such as location, style, size and age
etc. In present day it is the unforeseeable which cause the most concern.
To briefly sum up the outcome of this question; within the valuation profession
there will always be “Uncertainty in the comparable information available; uncertainty
in the current and future market conditions and uncertainty in the specific inputs for
the subject property” (French and Mallinson, 2000).

Question 3
Do you as an individual or company express uncertainty? – Quantitative (yes/no)
The general feeling from this result, which again is very credible is that the industry
make an effort to express uncertainty (see Figure 3), but not in a standard from, purely a
small comment at the end of an appraisal. See question 4 for details on these expressions.

Figure 3.
 JPIF One may say that the 18 per cent of candidates who do not express any uncertainty are
23,3 asking for trouble, by not making it obvious that valuation figures are subject to
fluctuation due to forces beyond their control.

Question 4
How do you and/or your company express uncertainty surrounding valuations?
276 .
Not standard, each case usually bespoke.
.
No standard form of expression. On the odd occasion when uncertainty is
expressed, reasons for it are explained.
.
We would express it differently depending on the circumstances. Personal
comment within the valuation or marketing report.
.
Comment on market condition at the time of valuation.
.
Price ranges.
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.
No, but we always include caveats as to what we have assumed and what
investigations we have/have not undertaken.
.
The firm does not have a standard form of expression but a valuer must always
indicate to the client that a property is always subject to fluctuations in market
conditions.
The expression of uncertainty is reported to “. . . enhance the decision making process
and aid the valuation users understanding of the valuation” (French and Mallinson,
2000). Most candidates use a guide or a range clause, which simply states that the
figure is an estimate and may change, rather than an exact figure. The main reason
behind this expression is to emphasise that no figure is guaranteed and subject to all
external variables (as discussed in question 2). It is more than likely to alter, either
positively or negatively. Another method of expression is a disclaimer within the
valuation report expressing that there is a chance that the figure may change due to
external factors. Valuation certainty “. . . identification and description will greatly
assist many clients, and will improve the content and credibility of the valuer’s work”
(French and Mallinson, 2000). This type of approach offers the client a full description
of all that surrounds the valuation of his/her property and gives the valuer peace of
mind knowing that any uncertainty has been stated.
Only 35 per cent of the candidates have a standard form of expression. One may ask
whether a standard approach is needed? One must understand that each valuation is
different and the uncertainty which surrounds each one will be different, however a
standard form of expression would be designed to help valuers’ be as accurate as
possible and offer the client full understanding of the value outcome.

Question 5a
Is it possible to get totally sufficient evidence to have a totally accurate valuation?
– Quantitative (yes/no)
Of the candidates, 67 per cent indicated that it is not possible to get sufficient
evidence in any particular case to have a totally accurate valuation (see Figure 4). This
is interesting as in Question 1, 83 per cent of the candidates stated that they felt it was
not possible to be totally accurate to open market sale price, however here it is only 67
per cent that feel it is not possible to gather adequate information to get a totally
 Practice
briefing

277

Figure 4.

accurate valuation figure. The result of this question when compared to Question 1,
proves that not all valuers consider why their industry is uncertain and are not realistic
in their view of accuracy.
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Question 5b
Why?
(1) Yes:
.
In some cases the evidence is very well established.
.
Yes, where there is lots of comparable evidence.
.
. . . your evidence needs to be as close to the subject property, however in
reality one has to make assumptions based on experience.
(2) No:
.
Evidence to give an opinion, but there is never a totally accurate valuation.
.
Only within the evidence available. Striving for accuracy, but there are no
absolutes.
.
Not possible to be totally accurate in any valuation. A valuation is an
assessment of what the market would pay.
.
Because it is still someone’s opinion which may vary from another.
.
Because price is subjective and not two properties are exactly the same.
.
Lack of open market deals [comparable evidence].
The majority of candidates were realistic and admitted that it was extremely hard and
in most cases impossible to gain a 100 per cent accurate valuation. However, a
valuation is only as accurate as the evidence on which it is based, so the valuation
figure all depends on the amount and quality of information available. Strangely some
candidates felt that it is possible to value something totally accurately, however only if
there was adequate comparable evidence available. This highlights the exact problem
the industry is facing. Where comparable evidence is relied on, whether plentiful or not,
there is always uncertainty because the evidence is made up of variables. These
variables are subject to change, thus cannot be totally relied on. The valuer must make
use of resources available, however must be realistic in saying that they can never be
totally accurate. There are some cases that are easier to value than others, such as
residential accommodation in an urban area due to the availability of comparables.
 JPIF However, an ongoing problem for the profession is the subject of unique or individual
properties. It is here that the problems start, because of a lack of comparable
23,3 transactions of the same type of property.

Question 6a
What happens when there is no real evidence?
278 (1) Yes:
.
Experience in these situations will be called on, with reference to “open
market” you may test the market with “guide” prices to see/judge the
markets reaction.
. You have to clearly state the assumptions on which you have relied and in
certain categories of property adopt alternative methods of valuation . . . .
(2) No:
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.
If there were no suitable evidence I would feel unable to rely on assumptions,
so would not be able to do the valuation. To date this has not happened.
.
You can only rely on real evidence, from there on you can utilise your
experience and consider the prices that prospective purchasers are prepared
to pay.
Mixed responses came from this question, however a pattern emerged whereby
assumptions are used when evidence is scarce or non-existent, but this is always stated
to the client to avoid conflict at a later date. As well as assumptions, the candidates
indicated that professional experience is an integral part of the valuation profession.
The feeling is that if one is not totally happy about making assumptions, one can rely
upon experience, or a culmination of both.

Question 6b
Does one rely on assumptions? – Quantitative (yes/no)
Here the candidates had to give an indication of what they do when there is not
enough suitable evidence. It is interesting to learn that some 29 per cent feel that
without adequate information they can still make an accurate figure. The other 71 per
cent are quite sensible in using a professional assumption in the valuation (see
Figure 5). It is also evident that most feel it only correct to explain these assumptions.

Figure 5.
 Some candidates stated that rather than rely on assumptions they would rather rely on Practice
experience. However, to rely on experience means one must make experience orientated briefing
assumptions in order to come to a valuation figure.
Question 7a
Which types of assumptions have to be made?
.
Valuation does not imply or include a (structural) survey; therefore general 279
assumption about overall condition (must be made).
. Whether “freehold of leasehold, no onerous comments or restrictions, clear title
and boundaries”.
.
They vary and must be agreed with client beforehand. Such as, date of valuation,
vacant possession, no contamination, building structurally sound etc.
The types of assumptions most commonly made are about the invisible parts of a
property and its surroundings. These include whether the building is structurally
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sound, deeds are legitimate, and that land is not contaminated. There is an element of
trust within the valuation industry, but thorough investigation on the part of the valuer
is integral too. If the property and its past/present are not properly investigated, one
must prepare for a hiccup, whether old or new, property always has its faults and they
must be uncovered to prevent any conflict and produce an accurate valuation.

Question 7b
Should they be standardised?
.
No real way of standardising.
. Standardisation would help.
.
Standard assumptions could be made but need to be set out . . .
Candidates felt that standardisation would be beneficial to the industry, mainly due to
lack of guidance on the subject. It would seem that this would be to ensure everyone is
following the same guidelines thus making the profession a fair one. Although the
RICS Red Book does have guidance for valuations within, they are not regulation and
do not have to be followed. Approximately 50 per cent of the candidates stated that
they did not feel it was necessary to standardise the way assumptions are used.

Question 8
How accurate are your valuations?
.
Accurate by doing research on values before going to the valuation.
.
þ /2 5 per cent or less.
.
Within acceptable tolerances – I am always happy with my figure.
.
They are thorough and researched, but are liable to market conditions.
This question was excellent at finding out how optimistic, pessimistic and realistic the
industries professionals portray themselves to be. The majority of the candidates were
willing to admit that they were not always 100 per cent accurate and that their figures
are subject to variables out of their control. One must remember that a valuation is an
opinion of value and can vary from valuer to valuer. Some candidates took this
opportunity to express their accuracy within a certain tolerance or range. This is
 JPIF interesting as there is no regulation tolerances set by the RICS, however they seem to be a
popular method of expression. It would seem that the candidates are basing their
23,3 accuracy on the type and quality of evidence available. This brings us back to the
problem of uncertainty, whereby the valuation is only as accurate as the evidence allows.

Question 9
280 Have you ever had a client(s) complain about a valuation’s accuracy?
.
No.
.
No . . . prospective clients are more likely to have complained (unofficially) if our
opinion is the value was less than their own expectations.
.
Yes, one case where clients were concerned that a probate valuation was going to
be higher than the (future) sale price, due to their view of the condition of the
property and concern that the market was falling.
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The general response to this question whether on a questionnaire or interview situation

was “yes” and “more than likely” because a client was not happy about the amount
their property had been valued. The supporting of valuations and the information that
surrounds them is integral and is part of the answer to uncertainty expression within
the valuation industry. This together with educational support from the RICS
regarding customer would offer the industry a more satisfied turnover.

Question 10a
Do you feel that there is adequate support on expressing uncertainty in valuations, for
instance from the RICS? – Quantitative (yes/no).
Interestingly the candidates seemed to feel that there was adequate support from
the RICS.

Question 10b
Why?
(1) Yes:
.
Yes, you are able to offer assumptions.
.
As long as all valuers in practice are intellectual and have appropriate
training; support is not entirely necessary.

Figure 6.
 .
The new RICS Red Book provides fairly clear advice as to the process for Practice
undertaking valuations, the assumptions to be made and therefore guidance
on uncertainty.
briefing
(2) No:
.
I do not believe it is adequately recognised by the RICS or by most clients.
.
No, because valuation is the formation of an opinion and should be backed 281
up with comments as to how one has arrived at a particular figure . . .
.
No, RICS Red Book is there for guidance, however is not obligatory. Would
be good to have a checklist.
.
If you express uncertainty in a report, you are not completing your duty to
the client. I do not think the RICS should support uncertainty.
As the quantitative results show, over 60 per cent of candidates feel that there is
adequate support from the RICS (see Figure 6). This is an interesting discovery as
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many of the candidates in question 7 stated that standardisation would help . . . surely
this is related to support from the RICS? One interesting point states that as long as
valuers are intellectual and have undergone appropriate training, support is not
entirely necessary. On the other hand some candidates felt that the RICS do not offer
enough support and guidance.

Question 11a
Is it acceptable to express a valuation within a certain tolerance (5 per cent, 10 per cent
or 15 per cent)? – Quantitative (yes/no)

Question 11b
If so, should it be standardised throughout the industry?
.
No, as it puts one into a hostage type position. An owner will not take factors into
consideration if valuation is wrong, they will be looking for compensation.
.
No, a valuer should be submitting a figure, however one usually uses a range in
agency work, formal valuations use a figure.
. We should all try to be as accurate as possible, but also need the comfort of
knowing there is some tolerance because the valuation of property is not exact
science.
.
Yes, there should be scope to do so if the valuer feels it is appropriate and
depending on the purpose of the valuation. However, it still relates to the value
on a particular date and there is no control over future market conditions.
Should this tolerance be standardised?
.
Yes, ought to be allowed. . . Note: “allowed” indicates thumbs up to
standardisation.
.
I believe this already exists on professional work to a 10 per cent value.
.
10 per cent accepted by most lending institutions but would not be understood
by the public.
.
A standard approach is needed.
 JPIF .
Definitely, but it should be remembered that each type of valuation calls for
23,3 different requirements. Sometimes one requires the offering of a value with a
“price bracket”, not a fixed price.
The use of tolerances offers the valuer some peace of mind, knowing that alongside
their figure is a “give or take” type clause stating that the figure may rise or fall slightly
either side of the amount. This question produced mixed responses, whereby some
282 thought that standardisation would be beneficial and others not. The interesting aspect
is that 67 per cent of the valuers questioned stated that a tolerance is a good thing and
helps to take away some of the pressure of the job (see Figure 7). However, not many
want to see it standardised. The position a valuer is in is not an easy one and is subject
to much scrutiny. However one must understand that the standardisation and
guidance proposals are hoping to help rather than disadvantage the valuer.

Question 12a
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Would you like to see more guidance from the RICS on the expression of uncertainty in
valuations? – Quantitative (yes/no) (see Figure 8).

Question 12b
Why?
.
As where appropriate, it will allow valuers and their clients to have a firm
understanding of why such expressions of uncertainty are to be used.

Figure 7.

Figure 8.
 .
The “. . . need for support, that is a ‘personal’ opinion . . . not cast in stone”. Practice
. Far better to leave it to individual valuers to deal with issue. briefing
.
The Red Book and descriptions of OMW, MV etc, go some way to doing this
anyway.
.
No, valuation is an art – not a science.
.
Yes, the more they can do to help, the better. Do not do RICS Red Book valuations 283
much these days as too complicated and too expensive for the client.
.
Would not be a bad idea, if the client is signing an agreement, whereby the valuer
is giving his/her “best shot” in a difficult world of varying market forces. Good to
have some organisational backing, if all goes wrong!
.
Yes, this would probably cut out unnecessary uncertainty.
.
(RICS guidance) not particularly important so long as existing advice in Red
Book is followed and proper experience is adopted. If that experience is not
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available, the instruction should be declined.

.
Valuers train and are paid to do a job, if they are unable to, then they should not
be undertaking those instructions.
The response to the question indicates that no more guidance is deemed necessary
from the RICS with regard to the expression of uncertainty. The opinions of the
candidates with regards to RICS support on the expression of uncertainty are diverse.
No true patterns have emerged and it would seem that some candidates are really not
that worried about the topic. It is evident that it is a personal opinion, whereby
guidance in some situations may be needed whereas in others experience takes over.

Conclusions
It is “. . . obvious that the profession recognises both normal and abnormal uncertainty,
yet we are still in a professional environment where we don’t provide the user of the
valuation with any information on the uncertainty of the valuation in normal market
conditions” (French and Mallinson, 2000). The valuer can only make an expert
estimation using all the knowledge and experience available. The lack of standardised
approach to the expression of uncertainty is an ongoing difficulty within the industry
and thus “. . . lie the seeds of misunderstanding” (French and Mallinson, 2000). One can
argue that “Uncertainty is a normal market feature deriving from the nature of
property, which should be openly acknowledged. It is variable from property to
property and from market condition to market condition. It is something to be
managed as it cannot be removed” (RICS, 2002b).
The customer’s knowledge of the uncertainty that surrounds any type of valuation
must be comprehensive in order to gain understanding between client and valuer. It is
clear from the research that the expression of valuation uncertainty is not standardised
in most companies and seems to be left to the valuer’s judgment. In light of this
evidence it would seem applicable for the RICS or another governing body to offer a
range of standards to adapt to all valuation requirements.
Guidance pertaining to assumptions and their use would be a positive step for the
valuation industry. Uncertainty is unavoidable in valuations, especially unique and
individual properties, thus guidance or even standardisation of assumption use would
 JPIF help to control the level of uncertainty present. The use of tolerances by the industry’s
23,3 professionals is realistic and offers the valuers a method of pre-adjusting the final
valuation figure.
“This recommendation is still being considered and was re-addressed by the RICS
Carsberg report in 2002” (French and Mallinson, 2000, p. 3). “It was the view of
Carsberg that the RICS should commission work to establish an acceptable method of
284 expressing the inherent level of uncertainty within a valuation” (French and Mallinson,
2000, p. 4).
Past reports such as the Mallinson and Carsberg aimed to “. . . establish an
acceptable method by which uncertainty could be expressed in a uniform and useful
manner. This would require agreement on the expression of the uncertainty of the
inputs and agreement on the output information that must be conveyed with each
valuation” (French and Mallinson, 2000). However, this issue is still outstanding and is
continuing to cause valuers unnecessary problems. It is clear that there is still a feeling
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within the profession that uncertainty is not fully and comprehensively conveyed to
the client within the valuation report and, where it is, this is down to the individual
valuer to make the necessary comment. Guidance Note 5 of the Red Book requires the
valuer to explain the uncertainty pertaining to the valuation in the report, yet this is not
in a prescribed form and it is clear that different valuers approach this in different
ways.
If the RICS strive “. . . to establish an acceptable method by which uncertainty could
be expressed in a uniform and useful manner . . . presented in a prescribed professional
standard” (French and Mallinson, 2000) it would benefit the profession throughout.

References
Brett, M. (1990), Property and Money, Estates Gazette, London.
Enever, N. and Isaac, D. (2002), The Valuation of Property Investments, 6th ed., Estates Gazette,
London.
French, N. and Gabrielli, L. (2004), “The uncertainty of valuation”, Journal of Property Investment
& Finance, Vol. 22 No. 6, pp. 484-500.
French, N. and Gabrielli, L. (2005), “Discounted cash flow: accounting for uncertainty”, Journal of
Property Investment & Finance, Vol. 23 No. 1, pp. 76-89.
French, N. and Mallinson, M. (2000), “Uncertainty in property valuation”, Journal of Property
Investment & Finance, Vol. 18 No. 1.
Royal Institution of Chartered Surveyors (RICS) (1994), The Mallinson Report: Report of the
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Chartered Surveyors, London.
Royal Institution of Chartered Surveyors (RICS) (1997), Calculation of Worth – An Information
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Royal Institution of Chartered Surveyors (RICS) (2002a), Property Valuation: The Carsberg
Report, Royal Institution of Chartered Surveyors, London.
Royal Institution of Chartered Surveyors (RICS) (2002b), Response to Carsberg Report, Royal
Institution of Chartered Surveyors, London, November.
Scarrett, D. (1991), Property Valuation: The 5 Methods, Routledge, London.
 Further reading Practice
Baum, A., Mackmin, D. and Hunnington, N. (1997), The Income Approach to Property Valuation, briefing
4th ed., Thompson, London.
French, N. (1996), “Investment valuation developments from the Mallinson Report”, Journal of
Property Valuation & Investment, Vol. 14 No. 5.
Hurd, R.M. (1924), Principles of City Land Values, The Record and Guide, New York, NY.
Isaac, D. (1998), Property Investment, Macmillan, London. 285
Isaac, D. and Steley, T. (2000), Property Valuation Techniques, 2nd ed., Palgrave, Basingstoke.
Joyce, L. and Norris, K. (1994), Valuers’ Liability, 2nd ed., The Australian Institute of Valuers and
Land Economists, Inc., Deakin.
Millington, A.F. (2000), An Introduction to Property Valuation, Estates Gazette, London.
Murdoch, J. (2002), Negligence in Valuations, RICS Books, Coventry.
Piantanida, M. and Garman, N.B. (1999), The Qualitative Dissertation – A Guide for Students and
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Faculty, Sage, London.

Royal Institution of Chartered Surveyors (RICS) (2002), Commercial Property, Property Solutions:
A Practical Guide for Your Business, Royal Institution of Chartered Surveyors, London.
Royal Institution of Chartered Surveyors (RICS) (2003), Chartered Surveyors Regional Directory
2003, Royal Institution of Chartered Surveyors, London.
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