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

Author

Listed:
  • William M. Doerner

    (Federal Housing Finance Agency)

  • Michael J. Seiler

    (Federal Housing Finance Agency)

  • Matthew Suandi

    (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.

Suggested Citation

  • William M. Doerner & Michael J. Seiler & Matthew Suandi, 2025. "Disclosure Dilemmas: How Appraisal Information Reshapes Residential Property Valuations for Mortgage Lending," FHFA Staff Working Papers 25-02, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:25-02
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    More about this item

    Keywords

    appraisal; disclosure; flood; mortgage; real estate;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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