Reducing the property appraisal bias with decision support systems

Any appraiser is subject to many potentially biasing influences which compromise the accu-racy of the appraisal. One of the most prominent biases is the anchoring heuristic: appraisers involuntarily anchor to reference points such as their previous valuation, the value opinion of the seller, or the last transaction price. While many studies have proven the existence and importance of the anchoring effect in real estate appraisals, very few studies have suggested practical means to counter it (ÒdebiasingÓ). In this paper we demonstrate that the anchoring effect can be reduced with a computer software supporting the valuers in their decision-making.In our experiments we asked experienced valuers and novices to perform a valuation of a commercial property, based on a set of documents and with the help of a self-written valua-tion software. Each proband received one of three versions of the software with different fea-tures for debiasing to test its influence on the appraised values. The experiments were carried out in Germany and South Africa using two variants of the income approach as the valuation method. Two of the properties were fictitious, one was real and for sale when the experiment was carried out. The comparison of the sub-samples adds to our understanding of how decision support systems can reduce valuation variance.