After-Sale Evaluations: Appraisals or Justifications

Abstract

This article argues that most residential evaluations done for lenders are not appraisals; instead, they are justifications for the amount of the loan applied for by the purchaser. The appraiser, by knowing the contract price, is under conscious or unconscious pressure to estimate value at or above the already agreed-to price. The research tests two hypotheses. First, appraisers are as likely to estimate value above contract price as below it. Second, staff appraisers are as likely to estimate value above contract price as are independent appraisers.