Читать книгу Advanced Issues in Property Valuation - Hans Lind - Страница 10

As there always are uncertainty about the price that is possible to fetch when selling a specific property at a specific point in time, the formulation ‘most probable price’ seems to be the best as this uncertainty then is clear. In IVSC (2019 , p. 18), ‘the estimated amount’ is also explained in terms of ‘the most probable price reasonably obtainable in the market’, even though it is not clear what ‘reasonably obtainable’ adds to the formulation.

This does not, however, solve all problems. Suppose that there are 10 observations from recent transactions of very similar properties. Should the most probable price refer to the mean value or to the median value? If the observations are skewed, there can be rather large differences between the mean and the median. As valuers usually are suspicious against ‘outliers’, the median should perhaps be the most relevant concept.

The next question is how ‘most probable’ should be interpreted in the context of property valuation. As discussed in Lind (1998 ), there are at least two definitions of probability, or two different ways of looking at the concept of probability.

The first is the frequency interpretation of probability. In this interpretation, saying, for example, that the probability is 1/6 to get the number 3 when throwing a dice would simply mean that if the dice is thrown a large number of times, then the result would be a number 3 in 1/6 of the throws.

This interpretation is, however, rather meaningless in a real estate valuation context as it is not practically possible to sell the same property a large number of times during a short period of time. Even in a rather homogenous market, there is a limited number of transactions. Defining the most probable price as the average of the observed prices would be the same as saying that the probability of getting a number 3 is not 1/6 because the frequency of getting number 3 differed from 1/6 in the first 10 throws. With a frequency interpretation of probability, it would therefore not be possible to present convincing evidence whether a certain price is the most probable or not.

A second interpretation of probability is the logical interpretation, where probability measures the degree of confidence that is rationally justified by the available evidence. This interpretation seems very suitable in a property valuation context. When a valuer, for example, asserts that the value is 100, it would in this interpretation mean that given the available evidence it is more rational to believe in a price around 100 than to believe in a price around 90 or around 110. Controversies about the value of a specific property can also typically be seen as controversies about the interpretation of the relevant evidence. A valuation method is from this perspective a method to collect and analyse evidence in order to arrive at rational belief about what the price will be if the property is sold.

The conclusion in this section is then that the formulation ‘most probable price’ is the best one and that it can be explained further by saying that it refers to the price for which there is the strongest arguments, or for which there is the strongest evidence.