An Investigation Into the Factors Contributing to Real Estate Valuation Inaccuracies and Variances in the Real Estate Valuation Practice in Kenya

Abstract

The research is an investigation into the factors contributing to real estate valuation inaccuracies and variances in Kenya. Real estate valuation inaccuracies and variances is a global impediment. In third world countries, in sub-Saharan Africa, countries such as Kenya, Tanzania, Nigeria and Ghana, the problem appears to be more rampant compared to developed countries. This is mainly attributed to inadequate and undependable data that characterize real estate sector in such countries. The factors believed to be the main ones exacerbating the situation were valuers’ misconduct, client influence, incongruous use of heuristics, valuation task complexity and limited and untrustworthy data. The study adopted a survey research design. Structured interviews and selfadministered questionnaire via Google forms were utilised to gather information. IBM SPSS statistical application software version 26 was used to analyze quantitative data. Frequency distribution tables, percentages, means and standard deviations were used to present the data. Qualitative data was analyzed in major themes and the data presented in narrations and verbatim form. The respondents for this study were valuers in practice domiciled in Kenya, financial institutions, the Valuers Registration Board and the Institution of Surveyors of Kenya. The obtained data posits that, inadequate and unreliable real estate data is the main factor contributing to real estate valuation inaccuracies and variances in Kenya, concurring with previous studies carried out in Kenya and other countries in Sub-Saharan Africa. Client influence and valuers misconduct appears to have similar impact on valuation inaccuracies and variances as the two factors did not have statistical differences when paired together. The revelations do not support the hypothesis that, client influence is the main factor contributing to valuation inaccuracies and variances in Kenya. vi The findings also suggest that the margin of error concept is common place among valuation practitioners, however, an agreeable margin of error percentage is yet to be settled on by both the valuers and Valuers’ regulatory authority. This leaves room for discussion and adjustments, whenever a dispute comes up for resolution by the Valuers Registration Board, the Courts and any other concerned parties. The study recommends collaboration between the Institution Surveyors of Kenya and the Valuers Registration Board on matters of valuation practice. It also recommends collaboration between the universities and professionals in practice to improve the valuation practice by equipping professionals with requisite valuation knowledge to enhance accuracy levels. In conclusion, it is evident that there are several factors impacting on real estate valuation accuracies, however, inadequate and unreliable data still remains the main factor that impact on accuracies and variances in Kenya.