The context behind this is likely to be used when two differing opinions of value exist but regardless of when or why the phrase is used, the doctrine of art versus science is well ensconced in the world of valuations.
However, just how true is this statement? Is valuation really just art, as someone once asked? If this is the case, then why is a valuation degree considered to be Bachelor of Science then? That’s a good question.
So, if is it art as well, it is more art than science or is it more science than art?
Let’s start by what we do know.
The science of valuations
We know that valuers place the all-important pounds, shillings and pence tag on the asset. We also know that depending on the type of asset, the basis of a valuation can be comparable led or it can be income led – in certain circumstances it could also be led by the cost to reinstate, but we’ll put this to one side for now.
In the residential space, we invariably look at comparable properties, adjusting as required for differences in location, size, condition, time of sale etc. All of which is factual, is it not? The size is factual, the location is factual, meaning that surely this must be science?
The alternative approach – probably more common in commercial real estate than residential but still used in the residential space nevertheless – is to look at the income a property generates. Again, this must be factual. The rent is factual, the yields are factual – the size of the building is similarly factual. So why is it said that valuation is an art given the very factual scientific nature of the data used?
The art of valuations
Considering these factors, it’s difficult not to err on the scientific side of the fence rather than the art side. However, let’s take a moment to consider what the valuer does with this information. As we know, the valuer values – so far so good – and we could be led to think that because the contributory data points are fixed, that the valuation is purely scientific formulaic and therefore valuation is science not art.
Can you feel a ‘but’ coming?
But, let’s consider how the valuer reports. They report their opinion of value. For me, the key word in the debate is ‘opinion’.
Yes, data forms part of the valuation journey, and indeed in an income driven world, more so and probably more formulaic, but the skill of the valuer is to use all of the data available, all of the science around the transaction to do the art bit, which is to form an opinion of value.
Yes, we have science – and increasingly so in the valuation journey – but the true skill comes from arriving at the all-important pounds, shillings and pence figure and, for me, that skill remains an art.
