Brent Foster's house in Paradise survived the 2018 Camp Fire. Eighty-five people didn't, and nearly 19,000 structures burned. Foster is an appraiser, and has been for years in Butte County, which means that in the months after the fire he was one of the people neighbors would have asked what their land was worth now. A year out, he told the Sacramento Bee he couldn't decide whether buying another property in his own town made sense.
"I am on the fence. I don't know if it will be a good investment or not. And I know a lot."
He had the training and the local knowledge. The uncertainty came from somewhere else.
The comparable-sales method is the foundation of residential property appraisal in the United States. When a bank writes a home loan it intends to sell to Fannie Mae or Freddie Mac, the two government-chartered companies that between them stand behind roughly half of all outstanding U.S. mortgage debt, the property has to be appraised. The appraiser's job is to estimate market value as of a particular date. The main tool is to find recent sales of similar properties nearby, adjust for the differences, and arrive at a number. Fannie Mae requires at least three closed sales. Adjustments have to reflect what buyers actually paid for a given difference, not what the appraiser believes a feature ought to be worth.
The method trusts transactions that already happened over projections about what might. In a steady market that works. After a fire moves through a neighborhood, it produces a value assembled out of conditions the fire has already removed.
The same problem, three fires
Philip Kantorovich has been appraising residential property for 37 years, much of it in Pacific Palisades. After the January 2025 fires, his assignments were burned lots and surviving houses ringed by destruction. He described the problem publicly: the comparable sales available to him had all been negotiated before the fire changed insurance availability, rebuilding costs, neighborhood condition, infrastructure, soil concerns, and how long reconstruction would take. Prefire sales could still serve as a starting point. They recorded buyer behavior under conditions that no longer applied.
Fifteen miles from Paradise, Chico appraiser Parke Noble hit the same wall after the Camp Fire. His assessment was short: "An adequate data set does not exist at this time."
Noble also had a problem the data vacuum made worse. Displaced families were buying homes in Chico at 5% to more than 25% above asking. Were those valid comparables? These weren't buyers shopping on a Sunday afternoon. They were households that had lost everything, bidding against each other for whatever was left standing within driving distance of work and school. Treating those sales as evidence of market value means treating emergency purchasing as ordinary demand.
Each of these appraisers was doing what the system asks: working the available evidence, disclosing its limits, exercising judgment. Read Kantorovich's careful public wording, though, separating prefire sales as "a starting point" from postfire sales that record "how buyers are reacting," and you can hear someone threading between people who want different things from the same number. A seller in the Palisades expects a value that reflects what the neighborhood was worth in December. The lender needs a number that supports the loan. The buyer wants an honest accounting of what the place is worth now, with everything that's changed. The appraiser sits among the three with a method that assumes the recent past still describes the street.
What the standards actually say
The rulebook appraisers are licensed against, the Uniform Standards of Professional Appraisal Practice, or USPAP, doesn't prohibit recognizing wildfire risk, flood exposure, insurance trouble, or neighborhood disruption. An appraiser is required to analyze any condition relevant to the assignment that has an observable effect on value.
The Appraisal Institute's Guide Note 10, which addresses valuation after disasters, goes further. It permits pre-disaster transactions with adjustments, sales pulled from other disaster-affected areas, and interviews with market participants when ordinary comparables are scarce. It says plainly that a disaster can leave a market unstable or chaotic.
But it also draws a line. Current market value is one question; whether a property will still be viable in twenty years is another, and the second falls outside the assignment unless someone specifically hired the appraiser to answer it.
So permission exists, as long as the recognition comes out of market evidence. No required climate model exists, and there's no standard discount for a fire-zone designation or adjustment schedule for risk that buyers haven't yet written into prices. The appraiser can register what the market has already absorbed. A good many working appraisers would defend that boundary and say the division of labor is correct: their job is to read a market, not forecast a climate.
Fannie Mae's environmental-hazard rules hold the same line. The company will buy a mortgage on a property affected by an environmental hazard when the hazard's effect can be measured through comparable market data as of the appraisal date. If a serious or newly identified hazard hasn't yet generated enough comparable data to support a reliable opinion of value, the loan can't be sold to them.
From the appraiser's chair that reads like this. You are working a post-fire market where buyers are visibly spooked and a handful of sales have closed. You may not have enough evidence to support a credible value, which means the house can't carry a standard, sellable mortgage. You also can't close the gap with a modeled estimate of future fire probability. The system would rather produce no number than an unsupported one. For the family trying to sell and the family trying to buy, that institutional caution arrives as a deal that doesn't close.
The insurance market already moved
While appraisal waits for evidence to accumulate, insurers are generating signal constantly, just not in a form the appraisal can use.
California's FAIR Plan, the state-backed insurer of last resort for people who can't get coverage anywhere else, now carries 696,562 policies covering $768 billion in exposure. Standard carriers have been withdrawing from fire-prone areas for years.
The Los Angeles Times reported in September 2026 that Alex Hwang and his wife, closing on a roughly $700,000 home in Menifee, couldn't find comprehensive coverage from a standard carrier. One policy they were offered excluded fire, which most lenders won't accept. They ended up with surplus-lines coverage, sold by insurers operating outside the state-regulated market, carrying a $25,000 fire deductible.
"I hate the $25,000, but I didn't really have a whole lot of choice."
The story doesn't say what the appraisal concluded, whether the appraiser considered the insurance problem, or whether the appraised value came in under the contract price because of fire exposure. Insurance pricing and appraised value run in separate channels. An insurer can put next decade's fire risk into this quarter's premium, or decline to write at all. The appraisal on the same house in the same week rests on sales that may have closed before the insurer repriced.
I've written about a version of this gap before. In issue #47, I followed a homeowner who documented more than $7,800 in wildfire-hardening work and got a nonrenewal notice the day he submitted the additional proof. Hardening a house could change what you pay without obligating anyone to sell you a policy. Appraisal has its own version of that. The appraiser can see that insurance trouble is changing how buyers behave, but nothing converts an insurance signal into a value adjustment until enough buyers have already reacted in recorded sales. The household sits in the interval, paying one number and borrowing against another.
New fields, same constraint
Fannie Mae's updated appraisal dataset, UAD 3.6, adds structured fields the old form never had. Appraisers will identify all known hazard zones affecting a property, not only FEMA flood zones, which were the single hazard the legacy form named. New fields capture mitigation: fire-resistant walls, fortified roofs, impact-resistant glass, flood vents. The form asks whether environmental site influences are adverse, beneficial, or neutral.
Mandatory use of Fannie Mae's updated appraisal dataset begins in five weeks. The new form collects hazard-zone and mitigation data the legacy form never captured, but doesn't change the underlying comparable-sales method.
Over time that structure could build the dataset that would let appraisers and researchers see how fire-zone designation, mitigation spending, or insurance difficulty tracks with sale prices. It doesn't change the method. The form still asks for market-supported effects as of the appraisal date.
There are specific places in an appraisal where forward-looking risk could enter, and specific reasons it doesn't. Comparable selection is one. Post-disaster sales, or sales from other burned markets, carry the newer signal, but in the months after a fire there may be too few to use, and the ones that exist may be recording displacement pressure rather than anyone's considered judgment about risk. Adjustments are another. An appraiser may mark a property down for hazard exposure, but the size of that mark has to be derived from observed price differences between exposed and unexposed homes; a modeled fire-probability score can't be converted into dollars on the form. The new hazard and mitigation fields make exposure visible and sortable, and they ask what the market is doing about it now, not in 2040. Insurance repricing contains exactly the forward-looking assessment the method lacks, and there's no standard route from a nonrenewal letter to a value adjustment. Property-level climate scores are sold by several vendors; USPAP supplies no method for turning them into dollars, and no mortgage giant requires their use. Evidence shows up only after buyers have already moved.
Who absorbs the correction
In 2021 the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, collected more than 60 responses to a request for information on climate and natural-disaster risk. Some recommended building climate readiness into appraisal data and standards. Others warned that pricing risk by location would reduce credit access in low-income and minority communities.
That second concern, sometimes called climate redlining, is where all of this lands on households. If appraisals begin reflecting forward-looking wildfire risk, values in fire-prone areas fall. Many of those areas were shaped by land-use decisions their residents had no part in making. Families bought in wildfire-interface neighborhoods because that's where they could afford to buy. A family in that position is looking at higher insurance costs and a lower appraised value at the same time. The risk wasn't priced when they signed. Pricing it now takes the correction out of the households with the least room to absorb it.
I've followed this sequence in other places, in flood districts and energy siting: the community that lives with the consequence is routinely the last one covered by the rules its situation produced. Accurate risk pricing is a defensible goal. Accuracy imposed without regard for who pays for it reproduces the inequity it's meant to address.
Meanwhile, the one federal body with authority to require forward-looking climate risk in residential appraisals has gone the other way. FHFA's 2025 scorecard told Fannie and Freddie to keep monitoring natural disasters and refining disaster analysis, and said nothing about appraisal standards. In March 2025 the agency rescinded its climate-risk management advisory bulletins. Its fiscal years 2026–2027 performance plan discusses emerging-risk monitoring without naming a climate-specific appraisal rulemaking, model, or pilot. The question of who absorbs the cost of accurate pricing is still open, and the regulator that could take it up has stepped back.
What the research shows
Academic work on climate risk and home prices confirms what appraisers in fire country already sense. Buyers do react, eventually, unevenly, and in ways that are hard to predict in advance.
A 2024 study in Land Economics found California homes inside state-designated wildfire hazard zones sold for about 4.3% less than nearby homes outside the zone, with bigger effects following severe fires. A 2026 study in the Journal of Housing Economics estimated that homes built under newer wildfire-resistance building codes sold for 1.4% to 2.5% more than otherwise comparable older houses. A 2024 review in Real Estate Economics found that wildfire-price studies generally report negative effects, but the size, duration, and geography vary so widely that dropping a single percentage into an individual appraisal without local evidence wouldn't be supportable.
An MIT working paper on residential appraisals in coastal areas exposed to sea-level rise estimated that appraisers understated the price effect of future flood risk, leaving properties overvalued by somewhere between 3% and 7%. Appraisers with more local experience and personal exposure to flooding produced smaller gaps. Experience with the hazard entered the judgment even though the method never asked for it.
Which returns us to Foster, Kantorovich, and Noble. Each brought local knowledge and firsthand observation of a disaster into the work. The standards left room for judgment, but the method gave them no standardized way to express what they knew. The research establishes that a gap exists without handing an individual appraiser a tool for closing it.
The appraiser's honest answer
An appraisal can satisfy a lending requirement, produce a number that supports the loan, without reflecting the full risk the house carries. The appraiser may understand the risk perfectly well, but the method may have nowhere to put it.
Kantorovich was precise about this: postfire sales record how buyers are reacting to the changed market, but there may be too few of them, and prefire sales may still be the starting point even though they closed under different conditions. He was working a market that had changed faster than its own sales record.
The comparable-sales method was built for a world in which the recent past was a reasonable proxy for the near future. For most of its history that assumption held well enough. Values moved with interest rates, employment, demographics, neighborhood change, and those forces generally left traces in recorded sales before they finished transforming a market.
Climate risk breaks the assumption in a particular way. A fire, a flood, an insurer's withdrawal can change what a market is made of while the sales record stays anchored to last year. The appraiser sees the change and the method wants evidence of it, and evidence takes months or years to show up in closed transactions. When it does arrive, it may be distorted by displacement, scarcity, or emergency conditions, which makes the new sales roughly as hard to read as the old ones.
Foster had the training, the local knowledge, and the experience of watching the fire come through his own town. He still couldn't answer, for himself, the question his profession exists to answer. He said so a year later, on the record.
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UAD 3.6 goes mandatory: Fannie Mae's new appraisal form becomes required on November 2, 2026, and the first months of structured hazard-zone and mitigation data will show whether the new fields change how appraisers describe fire-exposed properties or whether they remain checkboxes without valuation consequences.
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California's smoke-damage proof chain: AB 1795, the Smoke Damage Recovery Act signed September 15, creates insurer duties around sampling, testing, and additional-living-expense payments for surviving homes in wildfire zones — but whether a remediation clearance accepted by an insurer will also satisfy a lender's appraisal requirements for the same property remains untested.
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State Farm and Allstate filings: The California Department of Insurance announced that both carriers filed plans to resume some new residential writing, but a filing signals intended market entry, not an offer or affordable policy for a particular home in a fire-prone area — and whether returning coverage changes comparable-sales behavior is the appraisal question worth tracking.
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Condo documentation as precedent: Fannie Mae's new Full Review requirements for condominium projects already show how missing association records can block a mortgage route without proving a building unsafe — a pattern that could intensify if hazard-zone and mitigation documentation becomes similarly consequential for single-family appraisals.