Sale Price vs Appraised Value Disconnect

Sale Price versus Appraised Value Disconnect; 

How can it be said that valuing a property lower than its eventual sale price based on current market evidence is tantamount to BIAS? 

The article titled “FHFA Data Fueling Looks into Appraisal Bias” was in the Inside Mortgage Finance Publications e-newsletter on 4/06/23.

The Federal Housing Finance Agency is a is a critical provider of the data necessary for oversight, enforcement and research, FHFA Director Sandra Thompson noted during a discussion in late March.

According to aggregate statistics from the Uniform Appraisal Dataset released by the FHFA, roughly 57% of appraisals were above the contract price in 2021. Just 15.2% were below the eventual sale price, but these are the under-valuations that could possibly reflect bias.

And the important datum here is that this percentage is growing. In 2013, only 8.4% of appraisals came in under the contract price.

In addition to providing data, Thompson noted that FHFA has coordinated with the Department of Housing and Urban Development, the Consumer Financial Protection Bureau and the Department of Justice “to provide additional information for fair lending enforcement and oversight.”

If this actually reflects the true thinking of Ms. Thompson, she has aligned with so many others who believe SALE PRICE is immutable, and is the ultimate indicator of Value, and apparently, of bias, when not accepted as gospel by the appraiser. My gosh, what a misguided opinion!

Apparently Ms. Thompson didn’t see, experience or understand what happened during the ‘pandemic era’ in mid-2020 to early 2022, when overly emotional, and irrationally exuberant buyers paid astronomical prices for homes way above what their actual value was. The same thing happened in 2006-2008, but it wasn’t considered ‘bias’ then due to the different political climate and attitude at that time.

Conversely, how can it be said that valuing a property lower than its eventual sale price based on current market evidence is tantamount to BIAS? And, if 57% of the appraised values were ABOVE the sales price, couldn’t that also reflect BIAS? Seems to me that if one comparison in one direction is considered bias, the other in the opposite direction can be equally judged the same.

To better understand this concept, look up the definition of bias.

The political drumbeat of appraisal bias just because an appraisal Value doesn’t reflect Sale Price is blatantly wrong-headed. In fact, it reflects internal personal bias at worst, and exhibits a definite lack of understanding of the appraisal process, by the person promoting such falsehoods.

More appraisers should stand up and challenge Ms. Thompson’s assertions.

Dave Towne
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on

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8 Responses

  1. Avatar Pat says:

    Or the debacle of 2004-2008

  2. Avatar Will says:

    Sorry to tell you but the only group with racial bias is the group presently in political power. There you have it!

  3. Avatar JohnnyQ says:

    I just “biased” 2 sales this week because there was zero market support for the bloated contract price. Saved the borrower and the lender from over paying. If the buyer wants the property that much, there’s always the out of pocket option, backing out of the purchase, or renegotiation. Should the loan go south at the non supportable price in the future, both the lender and borrower’s “biased” index digits will be pointing at the appraiser.

    • Avatar Bill Johnson says:

      I just “biased” myself an appraisal to Johnny Q. Listed for $499,000, bid up to $545,000, appraised value $520,000. The subject is inside a 325 unit condo project where 23 units have sold in the past year all for $520,000 or below. Being a semi-flipped property (Renovation Reality), the subject warrants a premium, but with an active model match located directly above ($499,000 / adjustments warranted), market value is $520,000.

      What’s funny about bias Johnny Q, was the agents attempt to justify a value of $545,000 considering her knowledge from three days earlier (the list date) reflected a value of $499,000.

      Seek the truth.

      • Avatar PJTMC says:

        Your observation is spot on not to mention the listing Realtor has failed their fudiciary responsibility to the seller by under-listing the property based on the Realtor argument. Realtors do not typically “under-list” a property but no one wants to recognize that. “Pay no attention to the man behind the curtain”.

      • Baggins Baggins says:

        Exactly. Simple rebuttal lines for professional appraisers may include; Where does the instant equity come from, for the +$45k offer? Now either the buyer is offering over market, or the selling agent failed to list at market, so which is it? (Don’t let them shift blame for this activity to appraisers.) We also used to refer to these types of deals as being possibly straw buyers to artificially prop up pricing so other moneyed interests could cash out or drive up their rental costs if they owned multiple properties in the area, skewed indicators, outliers.

        This is why I comp search everything prior to accepting orders. The figure to comp search is the offered price, less any appraisal gap. Otherwise it’s simply an over market offer which could also be considered defrauding the lender, to entice the commission based agents to all rake a higher commission, by developing a loan for real property at a price point which can not be proven by bonafide closed sales.

        Basically the new reality is the same as the old reality, and hopefully more appraisers recognize the importance of the act of comp searching everything before order acceptance.

        $499k to $545k = + $46k / 2.5% commission = $1,150 additional commission over the initial base commission. $499k / 2.5% = $12,475.

        The commission based agents become unable to see clearly or represent fairly, when an additional thousand dollars worth of potential commission is just sitting on the table.

        Two firm rules for appraisers whom want to participate in mortgage lending; Direct assignment only. And requiring the lender to employ a licensed appraiser as their head of the appraisal distribution department. Amc’s don’t count, as the lead panel manager appraiser is shielded by the amc company license, so they basically can get away with any and all forms of applied pressure. Individual accountability matters.

    • Avatar Frank W says:

      You are the primary target on FHFA, unfortunately. They are going after those doing credible reports.


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Sale Price vs Appraised Value Disconnect

by Dave Towne time to read: 2 min