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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
    as

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    References listed on IDEAS

    as
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    3. Jackson T. Anderson & David M. Harrison & Kimberly F. Luchtenberg & Michael J. Seiler, 2023. "Legal Versus Psychological Contracts: When Does a Mortgage Default Settlement Contract Become a Contract?," The Journal of Real Estate Finance and Economics, Springer, vol. 67(2), pages 191-217, August.
    4. Yau-Huo (Jimmy) Shr & Katherine Y. Zipp, 2019. "The Aftermath of Flood Zone Remapping: The Asymmetric Impact of Flood Maps on Housing Prices," Land Economics, University of Wisconsin Press, vol. 95(2), pages 174-192.
    5. Geoffrey K. Turnbull & Velma Zahirovic-Herbert & Chris Mothorpe, 2013. "Flooding and Liquidity on the Bayou: The Capitalization of Flood Risk into House Value and Ease-of-Sale," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(1), pages 103-129, March.
    6. Bernstein, Asaf & Gustafson, Matthew T. & Lewis, Ryan, 2019. "Disaster on the horizon: The price effect of sea level rise," Journal of Financial Economics, Elsevier, vol. 134(2), pages 253-272.
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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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