The influence of contract prices and relationships on appraisal bias

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 add...

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Bibliographic Details
Published in:	Journal of urban economics Vol. 111; pp. 132 - 143
Main Authors:	Eriksen, Michael D., Fout, Hamilton B., Palim, Mark, Rosenblatt, Eric
Format:	Journal Article
Language:	English
Published:	Elsevier Inc 01-05-2019
Subjects:	Big data Collateral Mortgage lending Valuation R31 Valuation G21 L85 K11 Collateral Big data G28 Mortgage lending
Online Access:	Get full text
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Summary:	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.
ISSN:	0094-1190 1095-9068
DOI:	10.1016/j.jue.2019.04.007