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The influence of contract prices and relationships on appraisal bias

Michael D. Eriksen, Hamilton B. Fout, Mark Palim and Eric Rosenblatt

Journal of Urban Economics, 2019, vol. 111, issue C, 132-143

Abstract: A new measure is introduced to analyze the mechanism and extent of appraisal bias of residential property. The primary source of bias identified is in the weights appraisers assign to selected comparable transactions after adjusting for observable attributes. This unequal weighting results in an additional 23% of appraised values being at least equal to contract price. Appraisers were also more likely to bias appraised values for the properties associated with loan officers and real estate brokers they worked with more frequently. These findings offer insights into how appraisers confirmed ever increasing prices leading in to the housing market crash and subsequent Great Recession.

Keywords: Mortgage lending; Collateral; Valuation; Big data (search for similar items in EconPapers)
JEL-codes: G21 G28 K11 L85 R31 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jue.2019.04.007

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Handle: RePEc:eee:juecon:v:111:y:2019:i:c:p:132-143