Abstract
Mortgage appraisals are often required before a loan is approved. If information on the transaction price is available and lenders compensate appraisers, a principal-agent problem may arise. As a result, appraisers tend to overstate the value of a property because of their incentive to set the appraised value to be equal to (or greater than) the transaction price (Gwin and Maxam, 2002). This paper offers an alternative theory that generates a different empirical prediction. The theory is predicated on the updating appraisal process ala Quan and Quigley (1991) and a signaling modification to Gwin and Maxam (2002). Empirical tests to the theoretical moral hazard model postulated by Gwin and Maxam and the alternative theory herein is conducted using appraisal and transaction data from a lending institution in Singapore. The results support the alternative specification.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
