Competition and Appraisal Inflation

Conklin, James; Coulson, N. Edward; Diop, Moussa; Le, Thao

doi:10.2139/ssrn.3312360

Cited by 6 publications

(7 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…3 Appraisers cater to loan officer by overstating collateral value, as loan officers first go to appraisers whose reputation is to deliver appraisals at least as high as the transaction price. Conklin et al (2019) show that competition reinforces this bias.…”

Section: Introductionmentioning

confidence: 79%

The impact of competition on experts' information disclosure: the case of real estate brokers

Cherbonnier¹,

Lévêque²,

Zorn³

2019

26th Annual European Real Estate Society Conference

View full text Add to dashboard Cite

Competition can theoretically counter or reinforce tendency of experts to pass biased information to customers. Using data from an online company connecting real estate brokers with clients who want to sell their properties, we show that more competition or lower opportunity to collude induce brokers to raise their initial price estimation by more than 3%. This is observed upstream, when experts appraise the property for sale. Competition partially prevents brokers from biaising downward evaluations, and is beneficial to the client since it translates into a positive effect on listing and sale prices with no significant effect on the time to sale.

show abstract

Section: Introductionmentioning

confidence: 79%

The impact of competition on experts' information disclosure: the case of real estate brokers

Cherbonnier¹,

Lévêque²,

Zorn³

2019

26th Annual European Real Estate Society Conference

View full text Add to dashboard Cite

show abstract

“…Thus, we are able to circumvent a selection issue, discussed by Kruger and Maturana (2021), Conklin et al. (2020), and Eriksen et al. (2020), which is common in the literature.…”

Section: Datamentioning

confidence: 89%

“…Finally, in contrast to most databases that only include appraisal information for originated loans, our data include appraisals associated with applications that did not result in funded loans as well. 12 Thus, we are able to circumvent a selection issue, discussed by Kruger and Maturana (2021), Conklin et al (2020), andEriksen et al (2020), which is common in the literature.…”

Section: Datamentioning

confidence: 90%

“…In the fifth section, we look at the impact of distressed comp use on the weighting scheme used by the appraiser. Many studies (e.g., Ding & Nakamura, 2016; Conklin et al., 2020) note the tendency of appraisals to meet or exceed the contracted price. One way of making sure that this occurs is by manipulating the weight assigned to each of the adjusted sales prices in order to reach a final valuation that exceeds that threshold.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Distressed comps

Conklin

Coulson

Diop

2022

Real Estate Economics

View full text Add to dashboard Cite

We consider the use and impact of distressed properties as comparables in residential appraisals. First, we describe the incidence of their use and their relative comparability; second, we estimate their impact on the appraisal value itself; and third, we consider their impact on the probability that the appraisal is below the proposed transaction price. We find, generally, that distressed comps are largely good matches to their subject properties, which suggests that they are not necessarily used as a last resort. We find that they are not a drag on appraised value because appraisers learn to make the right adjustments over time. The use of distressed comps is associated with a higher probability of a belowprice appraisal due to the increased spread of appraisals around the contract price, particularly for higher priced homes. Overall, the use of distressed comps increased the uncertainty in the valuation process, but appraisers learned the appropriate adjustments over time. INTRODUCTIONAccurate appraisals are important to the transfer of property. Real property, such as single-family homes, are traded infrequently, and given the heterogeneity of each unit (as embodied in the property's unique set of characteristics), no immediate evaluation is available, as there would be for more homogeneous products. Appraisals are particularly important to the suppliers of mortgage credit. Without credit, most homebuyers would not be able to finance or refinance a home purchase, but the lender's underwriting standards generally require that an independent appraisal be performed, and this appraisal is crucial to the extension of credit to the purchaser. To obtain

show abstract

“…A large literature exists on the issue of appraisal fraud during the housing boom in the early-to-mid 2000s. Papers on the topic include Ben-David (2011), Agarwal et al (2014),Shi and Zhang (2015),Ding and Nakamura (2016),Calem et al (2017),Conklin et al (2019), andKruger and Maturana (2017).…”

mentioning

confidence: 99%

Untitled

2020

View full text Add to dashboard Cite

This paper exploits a natural experiment afforded by the fracking boom in Pennsylvania to shed light on the determinants of mortgage default. Looking only at mortgages originated before fracking became viable and using the underlying geology as a supply shifter, we find that mortgages on homes exposed to shale drilling experience a significant reduction in default risk. This effect is more than four times greater for borrowers who are underwater on their loans. Additional evidence shows that fracking activity does not raise house prices but significantly increases household income through higher royalty payments, wages, and salaries. Furthermore, we find that fracking directly leads to employment increases in the drilling/mining and construction sectors at the county level, and it reduces income from unemployment benefits at the ZIP code level. Finally, in addition to reducing mortgage default risk, we show that fracking lowers credit card delinquencies. These results are most consistent with the "double-trigger" theory of mortgage default, where underwater borrowers subject to an adverse income shock are much more likely to lose their homes to foreclosure.

show abstract

Competition and Appraisal Inflation

Cited by 6 publications

References 33 publications

The impact of competition on experts' information disclosure: the case of real estate brokers

The impact of competition on experts' information disclosure: the case of real estate brokers

Distressed comps

Untitled

Contact Info

Product

Resources

About