Erica Parker and Aaron Parker had their Loveland home appraised for the first time in 2020. The market was competitive, the couple had done several renovations, and the houses in their neighborhood sold for more than the asking price.
When the Parkers received the initial appraisal, it was $60,000 below the original list price. They knew that something wasn't quite right.
They tried a new approach and hired a new appraiser. The Parkers took out all the items that could indicate they were Black. This included artwork, family photos and photos of their children. They replaced these with memorabilia and photos borrowed from a White neighbour.
The White neighbor sat with the couple during the visit of the new appraiser, and as a result the home was valued at nearly $92,000 higher than it had been previously.
Erica Parker said that it was a strange feeling, but she felt vindicated. We were like 'Oh, my God, it's true, we were discriminated against.
Parker's story confirms recent statistics that show homes owned by Blacks are undervalued in comparison to homes owned whites. According to Brookings Institute data, homes in Black communities are valued 23% lower than homes in non-Black areas despite similar amenities and quality.
Lack of diversity in the industry
Black home owners say that this bias is a factor in the racial inequality of wealth because it reduces the returns on real estate for Black families.
Some claim it's systemic and blame industry leaders for a lack diversity, as well as a method that allows appraisers to have too much discretion when deciding on the value of a house.
According to the most recent data from the US Bureau of Labor Statistics in 2022, 92% of appraisers and evaluators of real estate will be White. Only 4% of them will be Black.
Lydia Pope, President of the National Association of Real Estate Brokers says that her organization works to recruit more Blacks into the appraisal business. The National Association of Real Estate Brokers hosts annual summits in HBCUs, to encourage students to enter the field. Pope also offers workshops and training to people who are already working in real estate and want to learn about appraisals.
Pope said that he was concerned about the lack of Black appraisers. We just want to take a stand and say that we need to change the culture surrounding appraising.
Pope says it is 'disturbing and discouraging' to see Black homeowners 'whitewashing' their homes to increase their appraisal.
She said appraisers usually assess factors like the condition of the home, upgrades and value of nearby comparable properties that have recently been sold.
Jillian White is a Black appraiser and the head of a consulting firm that helps homeowners dispute low appraisals. She says that appraisers can use their discretion and opinions to adjust the value of a house, which leaves room for bias.
White describes appraisal bias as a systemic, implicit or explicit, structural and structural phenomenon. You have these inflections where different decisions could lead to very different results. The method is not so rigid that all appraisers will come up with the exact same value.
White said that the industry needed to implement more guidance, protections and guidelines so that appraisers had less autonomy in their process.
Joshua Walitt is the president of the National Association of Appraisers, which last year condemned discrimination in professional appraisals. He says that the methodology itself is not the issue. Walitt, however, blames instances of bias on 'bad apples' in the profession.
Walitt asserts that even if there was bias, it would not have any influence on the appraisal results since they are based on data from the market.
Walitt says that by following methods and techniques, which are what we emphasize in education, it will push aside any bias a person may have. Walitt says that if there is any bad behavior, we should let the investigation take place and deal with it.
Walitt admits, however, that the industry needs to be more diverse. He is committed to expanding recruiting and supports programs like Practical Applications of Real Property Appraisal (PAREA), which make it easier for newcomers to get experience and enter the industry.
The issue of bias among home appraisers caught the attention of the Biden administration last year, who launched the Action Plan to Advance Property Appraisal & Valuation Equality (PAVE) to promote equity within the home appraisal process. The administration made an announcement in late March that it had made progress on this initiative. It published guidance to help Federal Housing Administration (FHA), borrowers, request a "Reconsideration Of Value" if they suspect bias.
White wants Black homeowners who receive low appraisals to be aware of their options. She tells her clients that they should appeal the first appraisal, and if it doesn't help them request a second one. White advises homeowners to file complaints if nothing changes. They can do so with the Department of Housing and Urban Development (HUD), the state appraisers board or the Consumer Financial Protection Bureau.
Some homeowners have successfully challenged claims of bias. In March, a Black couple from the San Francisco Bay Area named Paul Austin and Tenisha TATE-AUSTIN settled a discrimination suit against a realty appraisal company. Their home had been undervalued by almost $500,000. The couple will receive an amount of money that has not been disclosed as part of the settlement. In addition, the company is required to undergo housing discrimination prevention education.
Tate-Austin's lawyers released a statement to the San Francisco Chronicle saying that 'having to erase our identities to get a more accurate appraisal was an incredibly painful experience'. We hope that by drawing attention to this case and the settlement of the lawsuit, we can change the way appraisals are conducted.
Erica Parker claims that they sold their house in Loveland, Ohio for $507,500, and purchased a new one in Westchester. She filed a complaint of discrimination with HUD as well as the Ohio Department of Commerce. She said that neither complaint has been resolved.
She claims that her experience has only confirmed racism in the real estate industry.
Parker stated that he wanted the bank and appraisal firm to be held accountable for their actions and prevent it from happening again to people of color.