Disclosure Dilemmas: How Appraisal Information Reshapes Residential Property Valuations for Mortgage Lending

William Doerner, Michael Seiler () and Matthew Suandi ()
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Michael Seiler: Federal Housing Finance Agency
Matthew Suandi: Federal Housing Finance Agency

No 25-02, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: We find a puzzling increase in home valuations following the adoption of stricter flood standards. At the same time, we are observing shifts in appraisers' valuation practices. Specifically, appraisers reduce negative language, use fewer flood-zone comparables, and apply smaller adjustments to comparable sales, suggesting a behavioral adaptation rather than a market mispricing. Experienced appraisers are more likely to underappraise properties, yet appraisal values still generally match or exceed contract prices 89.2% of the time. These aforementioned changes and the underlying market dynamics are unlikely to be driven by changes in underlying flood risk. Future research on this topic is warranted.

Keywords: appraisal; disclosure; flood; mortgage; real estate (search for similar items in EconPapers)
JEL-codes: D84 G18 G21 K32 Q54 R31 R38 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025-01
New Economics Papers: this item is included in nep-acc, nep-env and nep-ure
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