Racial Bias Often Creeps Into Home Appraisals. Here’s What’s Happening to Change That
Jennifer Ludden, NPR, March 13, 2023
Years of homeowner horror stories and a growing body of research has cast a harsh light on how frequently racial bias can skew home appraisals. It’s an industry that’s dominated by white men whose methods for valuing homes haven’t changed much in decades.
Now there’s an intensified a push to diversify and to revamp the appraisal process in ways supporters say could limit this discrimination.
The pressure comes from allegations like those of Tenisha Tate-Austin and Paul Austin, who announced a legal settlement last week over what they believe was a racially biased appraisal. The Black couple were shocked in 2020 when a white appraiser valued their home in Marin City, Calif., at only $995,000 — far lower than a previous assessment. Tate-Austin recently told a federal panel how they scheduled a do-over with a white friend posing as the owner.
“Our friend Jan brought over a family photo,” she said. “We took down our family photos and replaced artwork so there was no trace of us in our own home, a term often referred to as whitewashing.”
That appraisal came in at $1,482,500.
Homeownership is the biggest source of wealth for many families, but a long history of racism in real estate has shut out many Black, Latinx and other families of color. The Biden administration has pledged a wide range of actions to tackle appraisal bias.
Change is also happening within the industry, as appraisers seek ways to replace judgment calls with concrete data, and even reconsider whether an appraiser needs to visit a home at all.
Appraisers need to have at least an associate’s degree and to pass a national exam. But the biggest challenge, especially for people of color, is finding a supervisor who will take them on and provide the required 1,000 hours of field training.
“Oftentimes with appraisers you hear, ‘Well, why would I hire somebody just to take my business?’ ” says Jack Sonceau, an appraiser in Maryland. He’s Black and got into the industry through a family connection.
The apprenticeship system is a big reason why there’s long been so many fathers training sons. And that helps explain why today, some 90% of U.S. appraisers are white and two-thirds are male. The field is also largely older and shrinking.
Sonceau makes a point of mentoring, and on a recent day he was letting his current trainee, Devin Minnis, take the lead as they went room to room inspecting a Baltimore rowhouse. Minnis says he’s lucky to have a supervisor who’s Black like him.
“I knew that I was getting into a very underrepresented industry,” he says. “But I did appreciate that I was coming into an industry that is supposed to operate from an impartial, unbiased, data-driven aspect.”
It’s unlawful to discriminate, and it’s not clear exactly how much undervaluation is due to appraiser bias. But Sonceau says it can certainly creep into an appraisal report, intended or not, and he’s keenly aware of the potentially devastating consequences for Black homeowners.
“It could maybe cost me not to be able to refinance my house,” he says. “Well, now I can’t refinance my house, I can’t send my kid to college.”
Ayako Marsh Miranda is a longtime appraiser in the Washington, D.C., area. As a Black woman, she says, “I represent 0.7% of all appraisers across the country.”
She’s glad that half a dozen states now require bias training, but she and others would like a federal mandate. White appraisers can also learn more about fast-changing Black neighborhoods they might not visit as much, Miranda says, and that’s crucial because choosing which nearby home sales, or comps, to include in an appraisal report is key to reducing bias.
To be sure, no appraiser interviewed for this story thought that a more diverse workforce is a silver bullet that can dramatically change the outcome of appraisals. All of them said that while there are biased individuals, the larger problems are structural. But they agreed the industry’s lopsided demographics demand an aggressive push to bring in younger people and those of color.
The Appraiser Diversity Initiative is helping fund the 75 hours of education Garcia needs, including textbooks and a special calculator. She’s also grateful for weekend classes and an adviser.
The Appraisal Institute is also co-sponsoring a new real estate appraisal class at American University. It’s a pilot, with plans to expand to Atlanta and its many historically Black colleges.
An even more effective check on possible bias might be updating the technology appraisers use to gather data. That’s because even something as simple as calculating square footage is not as straightforward as you’d think.
“I was taking customers from apartment A to apartment B, and the offer sheet would say they’re both 2000 square feet,” says John Liss, who runs an appraisal company called True Footage and began working as a real estate agent in high school. “You’d be shaking your head leaving and saying, ‘There’s no way these things are the same size.’ ”
The legacy of redlining — when banks refused loans to families of color — means that even today home prices in Black neighborhoods are lower overall. And Liss says current guidelines encourage appraisers to pick nearby comps from within those redlined areas, essentially baking in the racism. By contrast, research finds that in white neighborhoods appraisers tend to use comps from farther away.
To counter redlining’s impact, Liss is experimenting with artificial intelligence to see if it can choose more appropriate comps. As he sees it, sticking to one neighborhood is outdated because most buyers scout homes in several places. By including multiple neighborhoods, he says, “you can remove a portion of redlining and provide a more credible valuation.”