Appraisal Institute taking steps to root out racial bias
2018 study found Black-owned homes undervalued by $48K on average
Appraisers are at the center of nearly every home sale, scrutinizing the size, condition and quality of the property.
Now, the industry is taking a closer look at its role in determining home value, amid reports of racial discrimination by appraisers.
Appraisal discrimination has led to news stories, like one in which the value of a Black couple’s home in San Francisco increased by $500,000 after they took down family photos. Now, under new leadership, the Appraisal Institute is acknowledging that bias exists on some levels, reported Bloomberg CityLab.
As it studies ways to address discrimination, the Appraisal Institute is reportedly looking to ramp up training on unconscious bias, update its ethics standards and beef up diversity in its hiring practices.
Jillian White, a Black appraiser who works at mortgage company Better.com, said appraising a home is an art and science. Using “science,” appraisers can add value based on the addition of a wing on a house. The “art” is deciding whether the wing is worth $10,000 or $20,000.
“This idea that we’re just strictly reporting on the facts, that isn’t true, because if that were true you wouldn’t need appraisers,” White said.
In 2018, a Brookings Institution study found homes in majority-Black neighborhoods were undervalued by $48,000 on average.
Other research supports the idea that appraisal bias is systemic. By using a sales comparison approach, appraisers determine a home’s value compared to similar homes in the neighborhood. But that doesn’t take into account the effect of redlining and racial segregation in the housing market. Black, Latinx and Asian homeowners may not have experienced the same price appreciation as their white counterparts.
To address racial discrimination, one approach calls for automating appraisals. Other proposals call for reparations.
“Reparations are central,” said Junia Howell, a researcher at the University of Pittsburgh. “However, we can’t go forward with just reparations because then we still have a broken system.”
[City Lab] — E.B. Solomont