Appraisals play a critical role in the American homebuying process by informing lending decisions, determining property value, and managing financial risk. As such, appraisals’ accuracy is vitally important for a fair and efficient housing market.

Yet the current appraisal process continues to show room for improvement, as it hasn’t kept pace with market changes, larger data availability, and new technologies. An interagency task force meant to promote fair and accurate appraisals for all was recently disbanded by the US Department of Housing and Urban Development (HUD), stalling progress, collaboration, and transparency. At a time when we should be accelerating reform, given the advanced data and technology tools available to the industry, we are stagnating—despite how critical accurate valuations on collateral are to so many parts of the financial ecosystem and to consumers.

Recent legislative efforts are attempting to address this problem, including the Appraisal Modernization Act (PDF) introduced by Senator Raphael Warnock (D-GA). That bill seeks to achieve the following:

• mandate public disclosure of property-level appraisal data, increasing transparency and market accountability
• codify and standardize consumer rights to appeal appraisals, often referred to as reconsideration of value or second appraisal rights

These reforms would improve fairness and transparency, but additional measures could ensure the valuation process is based on objective market inputs—not private negotiations between buyers, sellers, and their real estate agents.

Removing the contract price from appraisals would be a meaningful change

One of the most straightforward ways policymakers could improve appraisal accuracy is by prohibiting the disclosure of the negotiated sales contract price to appraisers before they have completed their independent valuation. This change would directly address any influence a sale price has on the appraised value and would align residential mortgage practices with the collateral risk and valuation practices prevalent in commercial lending and insurance sectors.

Today, most appraisers are informed of a property’s contracted sales price up front, which introduces anchoring bias—effectively tethering the home’s valuation to the deal rather than to objective market evidence. Multiple research studies have shown that appraisals frequently come in with a value equal to or just higher than the contract price. This reality raises concerns that valuations essentially confirm transactions rather than independently evaluate properties’ value, weakening the integrity of the valuation and creating more risk throughout the mortgage ecosystem.

If Congress advances the Appraisal Modernization Act, it should consider the evidence that supports removing contract price disclosure before appraisal for residential sales. Doing so would reduce systemic bias, enhance appraiser independence and credibility, and support fairer outcomes for consumers, especially in communities that have historically faced or been harmed by inaccurate valuations.

Modernizing appraisals to mitigate the consequences of misvaluation

Inaccurate appraisals—both under- and overvaluations—have lasting effects. Undervalued homes can prevent families from obtaining loans, hinder wealth building, and depress surrounding property values. Overvalued homes can inflate local tax burdens, create appraisal gaps for future buyers, and contribute to broader market distortions. In both cases, misvaluations can perpetuate inequality and reduce long-term neighborhood stability.

The mortgage industry already has powerful tools available to modernize the valuation process. Licensed appraisers can access robust market data, standardized comparable sales, physical inspections, and increasingly, automated valuation models (AVMs) powered by artificial intelligence. These tools, not the agreed price, should form the foundation of any valuation from an expert.

The Appraisal Modernization Act could accelerate the use of these tools through its proposed advancement of data transparency and appeal rights. And other new approaches also offer promise, if deployed appropriately:

• Value acceptance (appraisal waivers), which are offered by Fannie Mae and Freddie Mac, waive the need for a full appraisal when sufficient data support the estimated value. They can significantly reduce transaction costs and time for qualified borrowers, but questions on who gets to benefit persist.
• Property data collection is the independent collection of home characteristics by trained data collectors, separate from appraisers. These data can be used by appraisers to inform desktop valuations, increasing efficiency and lowering consumer costs, which can be particularly valuable in areas with a shortage of appraisers.

Although these alternative tools can reduce anomalies, normalize valuations, and reduce consumer costs, the housing market still needs the judgment of licensed professionals. AVMs cannot assess property condition nuances, and data collectors cannot make final valuation calls. Human insights and expertise remain especially critical in diverse, older, or atypical housing markets.

To support these advances, Fannie Mae and Freddie Mac and the Federal Housing Finance Agency have published more-comprehensive valuation data and tools for lenders and appraisers, improving consistency and transparency across the industry—a very helpful step.

Policymakers can build on progress and embrace data in appraisals to promote accuracy, fairness, and trust

Appraisal bias and fairness have gained national attention in recent years. The Biden administration’s interagency PAVE (Property Appraisal and Valuation Equity) task force made significant strides toward transparency and accountability. The proposed Appraisal Modernization Act could build on this momentum by moving key elements of reform into statute.

Rather than retreat, Congress, regulators, and housing agencies should strengthen these reforms by removing undue influence, standardizing best practices, and embracing modern data, technology, and process efficiencies. Additionally, eliminating the disclosure of the contract sales price and suppressing its inclusion in final appraisal reports, unless required by state law, would protect appraisers from outside pressure and provide lenders and consumers with a fair value from which to transact.

Ultimately, buyers and sellers deserve confidence that the value placed on a home is fair, impartial, and based on market evidence, not anchored to a deal price. Appraisers deserve protection from implicit or explicit pressure to confirm a negotiated price. Given that buying a home is often the largest financial transaction in a person’s life, confidence and fairness in the valuation process should be nonnegotiable.

We have the tools. We have the data. We’ve seen the challenges. Now is the time to implement solutions that ensure every home valuation is accurate, equitable, and independent.