Larry E. Wofford

A Simulation Approach to the Appraisal of Income Producing Real Estate

The income approach to appraising real property has been criticized in at least three general areas: the use of point estimates for input variables and market value, the failure to use an after-tax valuation model, and the ability of a single valuation model to capture the market for a given property. The objectives of this study are the development of an analytical framework and computer model to overcome these criticisms. The computer model is developed using Monte Carlo simulation and allows the appraiser to consider uncertainty, after-tax cash flows and numerous valuation models. The ability of appraisers to generate the necessary inputs and the interpretation of the output from the model are demonstrated using a case study. Copyright American Real Estate and Urban Economics Association.

Managing cognitive risk in real estate

This paper explores cognition and its impact on the uncertainty and risk that surround real estate enterprises. We posit that cognition creates its own risk and affects risk from other sources in many ways, and we situate an overlay paradigm within a behavioural real estate paradigm. We develop the concept of cognitive risk, and examine it using a multidisciplinary perspective. We explore approaches to managing cognitive risk and offer a framework for further research and development of cognitive risk and its management.

Real Estate Problem Solving and Geographic Information Systems: A Stage Model of Reasoning

The development of computerized geographic information systems (GIS) and the accompanying extensive databases, many of them utilizing desktop computers, has created a technological revolution extending directly into real estate problem solving. Real estate problems are often characterized as uncertain, complex, and dynamic. Solving them, if solutions are possible, is a multistep process with a strong emphasis on deductive reasoning and decision making, both emphases adopted from the finance and economics disciplines. This article develops a stage model that considers the fundamental reasoning activities of description, explanation, prediction, judgement, and implementation common to all problem-solving steps in order to assess how GIS may affect real estate problem solving. The model is used to demonstrate the potential of GIS to more fully incorporate problem-solving steps other than decision making into the problem-solving process and to make inductive thinking more rigorous and accessible. The article also considers the issues of rigor and relevance and potential side effects and unintended consequences associated with the use of GIS or other information technology.

Ethical Choice in Real Estate: Selected Perspectives from Economics, Psychology, and Sociology

This chapter considers real estate ethics from the perspective of choice, or decision making, under uncertainty. The emphasis is on initiating a synthesis between economics, psychology, and sociology in order to broaden the scope of explorations of choice in real estate ethics. Starting with the generally accepted normative decision-making framework provided by rational choice theory, the study explores findings in psychology and sociology that describe how humans make decisions in the real world. Some of these findings may be useful in adding to the understanding of decision making provided by rational choice theory. It is suggested that a multidisciplinary framework, combining philosophy and science, is essential for significant progress in real estate ethics. Possible preliminary elements of such a framework are presented in the appendix.

Real estate valuation, cognitive risk, and translational research

Purpose – This paper seeks to consider selected aspects of the relationship between real estate valuation, human cognition, and translational research. Its purpose is to introduce the concept of cognitive risk, to propose a framework for mitigating it, and to develop a stream of translational research to transfer knowledge to real estate valuers.Design/methodology/approach – The paper takes an interdisciplinary conceptual approach towards the development and study of cognitive risk, and its mitigation. It proposes to broaden the study of behavioral issues in real estate valuation beyond cognitive psychology to cognitive science, and also fields such as time studies and human failure, in order to identify and mitigate cognitive risk.Findings – The paper offers a framework as a starting‐point for handling cognitive risk. It borrows the concept of translational research from medicine to discuss how basic theoretical knowledge may be communicated to real estate valuers to improve performance.Originality/value...

Assessing Student Perceptions of Real Estate Careers

In selecting a career, students seek to maximize expected satisfaction. Expected satisfaction is a function of perceptions of the relative level of critical attributes possessed by a career area. This paper uses multidimensional scaling to produce a perceptual space to analyze the perceived similarities and dissimilarities of eight business career areas for a group of students and identify the attributes critical to these perceptions. With respect to those attributes most critical to perceptions, real estate careers were perceived as providing relatively high economic potential, low prestige, low entry difficulty and little career predictability. Information such as in this study provides a baseline for career counseling as well as eliminating possible distortions in perceptions of real estate careers. Copyright American Real Estate and Urban Economics Association.