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ABSTRACT. Property value is imprecise because of the imperfection of the property market. But, estate surveyors and valuers in Nigeria traditionally have continued to express this value as a single amount. This paper, therefore, attempts to examine the rationale behind this approach and the attendant problems associated with it. Besides, the paper, amongst other things, recommended that estate surveyors and valuers should expand the scope of their services beyond the confines of point estimates so that clients be informed as to the amount of possible deviation and the magnitude of risk in the value estimate through the adoption of statistical techniques.
KEYWORDS: Point Estimates; Imprecision; Market Imperfections; Range of Value; Statistical Techniques
1. INTRODUCTION
The estate surveyor and valuer is an analyst of human behaviour in the property market whose main function is to estimate or predict the value of an interest in land. This estimate or opinion of value could help property owners (corporate, institutional, financial or individual) solve a myriad of problems including inheritance, asset sharing, asset allocation or relocation, property performance measurement, privatization and commercialization of assets, nationalization, property sales, purchases and so on. An issue which has remained a 'mystery' or myth' in the profession and to clients is how to explain the valuation process and how this is translated to a figure of value; thus, the phrase 'magic number'.
The process of estimating price or the magic number in the market place is often referred to as valuation. Yet, such an estimation will be affected by uncertainties. Uncertainty in the comparable information available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. This uncertainty, as described above, relates to valuation accuracy and not the variance in valuations produced by different valuers for the same property. It is expected, therefore, that the former uncertainties will translate into an uncertainty with the output figure, the valuation. This valuers' errors in price prediction arise from both random variation in observed prices of comparable sales used as evidence and the mistakes in the valuer's model of price differences. For instance, any individual property at a particular point in time have, possibly, different prices due to different circumstances of sale, differing buyer preferences, different...