Author(s): William M. Doerner, Michael J. Seiler, and Matthew Suandi
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.
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