Jul 18, 2017

Appraised values are crucial in underwriting mortgages and CoreLogic says one of the challenges is to make sure the information an appraisal provides is valid.  Appraisers are supposed to use current or recent transactions within the same market with similar physical and economic characteristics.  These comparable sales serve as the baseline information on which the appraisal is developed. 

Appraisers are expected to use care and due diligence to ensure that the data on comparable sales they receive from third party sources are accurate.  The sources are most commonly multiple listing services or county recorders (public records).  MLS data are particularly important in providing the most up-to-date information on the local market.  In a national sample of about two million single-family home appraisals, nearly nine out of ten of the comparable sales used by appraisers contained a direct reference to the local MLS as the source of data.

This reliance on MLS data presupposes the accuracy of MLS information, so CoreLogic checked those prices against public records data. To avoid potential confounding effects of regional differences in the quality and availability of public records data (for example, caused by state disclosure laws), the analysis shown here is based on a single state, California, and examines only purchase transactions in 2015 and 2016.  The research involved 156,000 comparable sales.  The company found an overwhelming level of agreement between the public records data and MLS information.  In 91% of the sample the appraisal-report price was identical to what was capture by county recorders. Where there was a difference, it was minimal, and the MLS-derived price tended to be lower.  Six percent showed a price difference of less than 0.25 percent.