November 10, 2022
Interracial couple gets 2 different appraisals values on the same house.
Interracial couple gets 2 different appraisals values on the same house. White partner gets a higher home valuation.
A new study from the National Community Reinvestment Coalition reveals that interracial couples’ residences in the Baltimore, Maryland, region had varying appraisal values depending on the partner who welcomed the assessor and whether the house was “whitewashed.” In one instance, the appraiser visited just with the white homeowner in an interracial couple and valued the single row house at $350,000. According to the NCRC, which said it selected the appraisers at random and scheduled their inspections on various days, but as close together as possible, the person’s Black partner obtained a valuation of $310,000 — given by a different appraiser who met solely with them. Each test involved two complete appraisals performed by two independent appraisal firms, with the white spouse presenting a “whitewashed” home in which all traces of their Black partner, such as family portraits and cultural artifacts, had been eliminated. On the other side, the Black partner presented a “blackwashed” home that concealed any evidence of the White partner. Jesse Van Tol, president and CEO of the NCRC, a nonprofit organization with headquarters in Washington, D.C., said in a statement that the discrimination he and his team discovered in the assessments system “undermines Black wealth-building and almost definitely violates the law.” “It is intolerable that when working with Black homeowners, appraisers undervalue homes and act less professionally.”
The NCRC study is not the first recent instance of prejudice in the house appraisal profession, which, according to government statistics, is predominately white.
The National Fair Housing Alliance published an 84-page report earlier this year detailing how historically, racial risk associations have diminished the value of Black neighborhoods, including through the use of color-coded maps that “redlined” and labeled these neighborhoods as dangerous, making it more challenging to obtain mortgages there.
The report stated that because home values have traditionally been the foundation of intergenerational wealth in the United States, historical appraisal practices “have had long-term effects in creating some of the current wealth inequalities where white wealth has soared while Black wealth has remained stagnant.”
According to information from more than 12 million assessments, Freddie Mac FMCC also reported last year that, in contrast to 7.4% of homes in white census tracts, 12.5% of properties in black census tracts had appraisal values that were less than the contract price.
In addition, a 2018 Brookings Institution study found that, when compared to the value of homes of comparable quality in neighborhoods with comparable amenities but few to no Black residents, homes in majority Black neighborhoods were undervalued by 23% less on average, amounting to $48,000 less per home.
As a result of these inequities, Black homeowners have filed numerous lawsuits alleging maltreatment.
For instance, a Black couple in Marin City, California, said that in 2020, an assessor gave their property a value of $995,000, which they believed to be low given that they had invested $400,000 in repairs. According to KGO-TV in San Francisco and the Washington Post, a separate appraiser evaluated the home at $1.48 million when the Black couple brought in a white acquaintance to act as though the property belonged to her.
The original appraiser and her company were later sued by the family, and a trial is scheduled to begin next fall, according to the North Bay Business Journal. (According to the North Bay Business Journal, a settlement agreement was struck with the firm that hired the appraisers, the other defendant in the complaint.)
Additionally, according to the New York Times, a Black history professor and his wife, a lecturer in literature and Africana studies, claimed that before they started the refinancing process last summer, a local appraisal company valued their home at $472,000, only $22,000 more than what they had paid in 2017 despite $35,000 in renovations and a new $5,000 tankless water heater. A refinance loan was later turned down for the family.
However, their home was valued at $750,000 when they took down the family pictures and a white, male coworker filled in for a second inspection. According to the New York Times, they ultimately filed lawsuits against the mortgage company that rejected their loan, the appraisal firm that performed their initial appraisal, and the initial appraiser who they claimed had wrongfully compared the value of their home to the sale prices of “comparable” properties that allegedly included a fixer-upper and a property outside of their neighborhood.
The NCRC report made mention of both situations.
In his statement regarding the NCRC’s report, Van Tol stated that “the evidence of systemic bias in the appraisal business has been mounting for some time,” but “NCRC’s new testing showed that interracial couples in Baltimore get far better treatment and valuations if the appraiser believes the homeowner and their family are white.”
The NCRC study looked at 14 evaluations that were completed across seven “tests” on four multiracial couples that own properties in the Baltimore region.
Despite exhibiting the same home, the white couples received values of roughly $7,000 more on average than their Black partners, the survey stated.
In three of the seven tests, however, Black partners had appraisals that were greater than those given to their White spouses; one Black homeowner had an appraisal of $500,000 while their partner had an appraisal of $460,000. Another Black partner received $10,000 more on a home than their white partner, and a third partner received $5,000 more. The remaining valuation discrepancies were smaller.
During the tests, the Black partners occasionally experienced noticeably inferior customer service. Black partners had bad experiences in two of the seven exams, according to the NCRC research, whereas white partners reported positive experiences throughout all seven tests and received their assessment reports on time. One Black partner was ghosted by the appraiser and never received a report; another was requested to pay in advance but then received their exam almost 11 weeks later.
According to the NCRC, these kind of delays can cost Black homeowners money when selling or refinancing their homes, either by impeding a sale or by making the homeowner responsible for higher borrowing expenses as interest rates rise.
Undoubtedly, the Appraisal Institute, a trade group for appraisers, claims to be working to increase diversity in the industry. Earlier this year, Jody Bishop, the organization’s president, told the House Committee on Financial Services that the group was “very concerned” about claims of bias.
Bishop added in a statement to MarketWatch that “when we read even one story of a consumer who thinks they were treated differently because of their race, it’s gut-wrenching since that goes against everything appraisers stand for.” “When it comes to housing concerns, appraisal is just one component of a bigger ecosystem to consider. The Appraisal Institute makes it a priority to prevent unconscious prejudice from influencing evaluations and to look for more comprehensive solutions to diversity, equity, and inclusion in housing.
Bishop continued, “This country needs ideas put forth by real estate brokers/agents, banks, government organizations, appraisers, and others to create a more equitable housing situation.