Center for Policy Research
Property Tax Web Series
Appraisal Overvaluation: Evidence of Price Adjustment Bias in Sales Comparisons
Yanling G. Mayer and Frank E. Nothaft
October 2022
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Abstract
Home appraisal came under scrutiny for contributing to the home-price bubble and enabling the origination of risky mortgages that led to the post-2006 foreclosure crisis. Subsequent regulations tried to minimize or eliminate conflicts of interest and improve valuations. Nonetheless, our study of appraisals completed in 2015 and 2016 find that appraisal bias still occurred. Our analysis delves into the underlying appraisal development to identify causes of appraisal bias. Contributing factors are that comps are generally higher valued than the subject property, and appraisers are more likely to comparatively adjust upward lower priced comps but less likely to adjust downward higher priced comps.
This paper was presented by Yanling G. Mayer (CoreLogic Inc.) on October 21, 2022 as part of the 2022-2023 Syracuse-Chicago Webinar Series on Property Tax Administration and Design. Troup Howard (University of Utah) was the discussant for this presentation. Howard comments on Mayer’s “Appraisal Overvaluation: Evidence of Price Adjustment Bias in Sales Comparisons.”
This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.
For questions about the webinars, please contact Zia Jackson. For questions about this paper, please contact the author or authors.