We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
When Appraisers Go Low, Contracts Go Lower: The Impact of Expert Opinions on Transaction Prices.
- Authors
Fout, Hamilton; Mota, Nuno; Rosenblatt, Eric
- Abstract
Using home purchase loan application data, we study buyer responses to the uncommon occurrence of the appraised value coming in below the contract price (i.e. a low appraisal), which sharply raises the probability of downward price renegotiation. We propose that two mechanisms drive the higher renegotiation rates. First, a liquidity channel, visible for financially constrained borrowers for whom a low appraisal impacts financing costs. Second, for financially unconstrained borrowers, we identify a news channel whereby the information content of the low appraisal alone induces borrower renegotiation. Importantly, we show that low appraisals result in lower renegotiated prices through these channels without a substantially lower likelihood of a loan application leading to loan origination or notably longer times from contract signing to sale.
- Subjects
PRICES; LOAN originations; APPRAISERS; VALUE (Economics); MORTGAGE loans; LOAN agreements; HOUSE buying
- Publication
Journal of Real Estate Finance & Economics, 2022, Vol 65, Issue 3, p451
- ISSN
0895-5638
- Publication type
Article
- DOI
10.1007/s11146-020-09800-6