Copying Transaction Prices: How Dutch Housing Appraisals Track Idiosyncratic Variation

Ramon F. A. de Punder and Mathijs R. G. Dijkstra
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Ramon F. A. de Punder: University of Amsterdam
Mathijs R. G. Dijkstra: University of Amsterdam

No 26-086/III, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: An appraisal is intended to provide an independent estimate of a dwelling’s market value. We find instead that appraisals track the realized transaction price, including its idiosyncratic component, the part specific to this buyer and this sale, which carries no information about the expected price if the dwelling were resold almost immediately. This follows from the incentives in mortgage lending: all parties to the transaction benefit when the appraisal allows the purchase to proceed, so that a valuation formed with reference to the agreed price tends towards that price. In Dutch residential transactions, nearly all appraisals are multiples of €5,000, and up to rounding to that amount, 41.5% of appraisals equal the transaction price. A Monte Carlo test, which accounts for the uncertainty in the price of each dwelling, shows that appraisals lie far closer to realized prices than independence would allow, providing overwhelming evidence against it. Regressions show that appraisals pass on about four fifths of the deviation of the price from the mean of its estimated distribution, and we show that such copying raises the collateral risk for both borrower and lender. These findings call into question physical appraisals as an independent safeguard, and point to statistical valuation models, formed independently of the transaction price, as a natural alternative.

Keywords: Idiosyncratic copying; Collateral risk; Predictive distributions (search for similar items in EconPapers)
JEL-codes: C12 G21 L85 (search for similar items in EconPapers)
Date: 2026-11-01
New Economics Papers: this item is included in nep-hre
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