Lee Davenport began her career as a real estate agent in 2008. She says that since then, neither one of her clients nor one of the agents who she coaches has ever suspected racial bias when it comes to an appraisal.
Multiple news articles have reported on the potential bias in appraisals. They report cases where Black homeowners were valued lowly, but their value increased in a subsequent appraisal once all personal photos and cultural objects had been removed.
A Freddie Mac report from September 2021 found that in Black and Latino areas, appraisal values were more likely to be below the contract price than in areas dominated by Whites. A Freddie Mac report from September 2021 found that appraisal values were lower in Black and Latino neighborhoods than in areas with predominantly White residents.
After examining millions in agency property valuations from December 2021, Federal Housing Finance Agency published a Report(link is external). that identified thousands of biases related to the neighborhood descriptions written by appraisers. The report included examples of appraisers who referred to the racial composition or percentage of immigrants in a neighborhood. Congresswoman Maxine (D-Calif.) chair of the House Financial Services Committee sent a request for an investigation to the Department of Housing and Urban Development(link is external). The Appraisal Foundation and the Appraisal institute in February 2022. In the meantime, HUD Secretary Marcia Fudge is the chair of the Interagency Task Force on property appraisal and valuation equity (PAVE), which was created in June 2021 in order to address discrimination during the home buying process and appraisal.
Industry Response
The Appraisal Institute, which establishes standards and qualifications authorized by Congress for real estate appraisers has added a segment about fair housing laws and prejudice to its seven-hour USPAP continuing education course. The Appraisal institute recently added a 5-hour seminar addressing unconscious bias. It also updated its code ethics and created a guide that affirms appraisers shouldn’t consider ethnographic or other personal characteristics in property appraisals.
Jody Bishop is the 2022 president and senior managing partner at Valbridge Property Advisors, Mount Pleasant, S.C.
Corey Hammonds is the founder and CEO of The Hammonds Group, a Nashville-based company. Hammonds was the youngest African American general appraiser certified in Tennessee.
It’s an unintended loss of access. Hammonds says that many people don’t understand what an appraisal is and what it does. The qualifications required to become an appraiser can be very costly. People tend to do business with people they know. If you are not well-connected, it is difficult to break into the industry.
According to The Appraisal institute, there are 78,000 US appraisers, of which 85% identify themselves as White, and 77% as men. The Appraisal Institute is partnering up with Fannie Mae and Freddie Mac as well as the National Urban League to launch an initiative aimed at increasing diversity in the appraisal profession.
The National Association of REALTORS® has its own diversity equity and inclusion initiative. This includes a mentoring program called NAR Spire. NAR worked with the Biden Administration on the PAVE Action Plan released in March. It contains 21 recommendations to improve government oversight of the appraiser industry, and to work with federal agencies and stakeholders on educating consumers about how to identify and report possible instances of bias. The plan suggests developing procedures that ensure automated valuation models don’t include bias in their estimations.
