Assessing the impact of client influence on the objectivity of valuers and valuation figures returned in property valuation

Abstract

In recent years, studies have established that valuation estimates are likely to be biased estimates of market values due to client influence. These studies, which have made a significant contribution to real estate literature, were based mainly on United Kingdom (UK), United States of America (USA) and New Zealand experience. The purpose of this research is to assess the impact of client influence on the objectivity of valuers in property valuation. A questionnaire survey was administered to valuers to gauge their professional opinion with regard to client influence, sources of such influence and types of threats used by clients. The survey revealed that nearly 95 percent of valuers claimed some knowledge of client influence, mostly from a private individual. The results of the bivariate analysis of client influence on valuation outcome and other variables using the chi-square method also indicated that the decisions of estate surveyors and valuers as to whether to alter valuation outcome upon clients’ request are affected by secured lending valuation purposes, reward and information threats, valuation firm characteristics and client characteristics. The survey established that client influence exists in the Ugandan valuation industry and is rapidly eroding valuers’ objectivity in property valuation in the country. It is recommended that the valuation professional and regulatory bodies should adequately address valuers’ independence in the valuation standards and practice regulations and seek for legislation to guarantee it. They should clearly define what constitutes client influence. Firms should improve on the business ethics that support the protection of the integrity of individual valuers, firms, and the profession.