A Taxonomic Field Investigation into Induced Bias in Residential Real Estate Appraisals

Abstract

A taxonomic approach to field research was developed and utilized to support empirical and experimental research findings into the impact that incentives/pressures to over-value have on systematic valuation bias. An expected no-bias population was defined and valuation judgments from actual, real-world appraisals were statistically tested against it. The judgments of appraisers presented with no incentive/pressure to over-value were consistent with the no-bias population, while the judgments of appraisers presented with incentive/pressure to over-value were significantly incompatible with the defined no bias population.

Keywords: real estate appraisal, mortgage lending, valuation judgment, default risk, client-agent impacts, Liquidity Crisis of 2008

JEL Classification: R00, G12, C12, C52, C93