Does the analytical hierarchy process help appraisers make better decisions?: A quasi-experimental approach for property investment comparables

Aihie, Vincent and Oyetunji, Abiodun and Omotayo, Temitope and Ekundayo, Damilola (2023) Does the analytical hierarchy process help appraisers make better decisions?: A quasi-experimental approach for property investment comparables. International Journal of Building Pathology and Adaptation. ISSN 2398-4708

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Purpose: Income from investment properties can fluctuate depending on the state of the economy. The idea that there is always a potential exit (sale) value whenever the property stops performing at its optimum or deflation in the economy will always appeal to investors. To determine housing prices, investors would rely on a direct comparison approach of recent substitute sales in the open market. Appraisers use this approach to develop an opinion of value when there is a plethora of recent sales to analyze.

Design/Methodology/Approach: The study was designed to establish the use of the Analytic Hierarchy Process (AHP) approach as a support tool for deciding property appraisals. A case study of an industrial single-storey stand-alone building with grade-level parking in the South-East of Calgary, Canada, was investigated with the AHP approach. The result was cross-referenced with the direct comparison approach.

Findings: Using a consistency index of 0.077321 and a consistency ratio of 0.085912, the Matrix Multiplication (MMULT) was determined to be 0.456706. The average valuations derived from the adjusted price per square foot using the Direct Comparison Method and the unadjusted price per square foot using the AHP were deemed the best value estimate in the light of available comparables. The implications of the findings suggest that AHP, as a quantitative technique, can support and validate the use of similar non-recent sale comparables when appraising investment properties with the DCA.

Originality/Value: AHP is an alternative aid in quantitatively deciding the most significant value attribute for comparison before subjective adjustments. When intuitively applied in the direct comparison approach, these subjective adjustments almost always lead to an overvaluation of properties.

Item Type: Article
Identification Number:
16 August 2023Accepted
5 September 2023Published Online
Uncontrolled Keywords: AHP, appraisal, comparables, decisions, direct comparison, valuation
Subjects: CAH00 - multidisciplinary > CAH00-00 - multidisciplinary > CAH00-00-00 - multidisciplinary
CAH09 - mathematical sciences > CAH09-01 - mathematical sciences > CAH09-01-02 - operational research
CAH11 - computing > CAH11-01 - computing > CAH11-01-03 - information systems
CAH13 - architecture, building and planning > CAH13-01 - architecture, building and planning > CAH13-01-02 - building
CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics
CAH17 - business and management > CAH17-01 - business and management > CAH17-01-04 - management studies
CAH17 - business and management > CAH17-01 - business and management > CAH17-01-09 - others in business and management
Divisions: Faculty of Computing, Engineering and the Built Environment > College of Built Environment
Depositing User: Damilola Ekundayo
Date Deposited: 30 Aug 2023 10:47
Last Modified: 20 Jun 2024 11:45

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