4 Uncontrollable Factors that Can Affect Home Appraisals

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4 Uncontrollable Factors that Can Affect Home Appraisals

…some uncontrollable factors that come into play when determining the value of residential property…

This article contains a range of false and misleading information. You can find a rebuttal here.

There are many factors that can affect the valuation of a residential property. Some of these factors, such as the level of care and maintenance work that the homeowners carried out, can be controlled. There are also factors, such as racial biases, that may unknowingly appear in the picture.

In recent years, some homeowners have reported that they received significantly higher valuations for their residential property once they eliminated traces that indicated their race from their home prior to the arrival of a new appraiser. Appraisers are bound by law to carry out their work with fairness and equality towards all races, religions, gender, or ethnicity; however, appraising a home, in itself, is a subjective act.

Some appraisers may be unaware of their internal biases, and pinpointing exactly where and how these biases are subconsciously applied when appraising a home can be challenging. This is why it’s prudent for real estate appraisal firms to select and mold their trainees to be conscious of biases and know when to withdraw if needed. This ensures a fair and honest appraisal at all times. Similarly, real estate agencies do something similar by incorporating these BrokerKit recruiting ideas that they can integrate into their recruitment process. As a result, problematic hires can be avoided altogether.

At the same time though, many homes are appraised at a much lower value than what the homeowner expected, not because of discrimination, but due to the property’s innate qualities. Below are some uncontrollable factors that come into play when determining the value of a residential property:

Property Location

Perhaps, the most significant yet uncontrollable factor that dictates the value of a residential property that’s going up for sale is its location. The truth of the matter is that some locations are simply more desirable than others. After all, homes that are located in in-demand areas are likely to be sold at a higher price compared to similar properties in less-than-desirable areas in the same city. There are many layers to the desirability of a home’s location. Its immediate location, such as whether or not it’s in a corner or near a busy street, matters. It’s also a consideration if the home is near a billboard or other features that can make it less than attractive to possible buyers. The safety of the neighborhood is paramount as well as is its proximity to attractive facilities like reputable schools and hospitals that provide world-class care.

Comparable Properties

To provide a fair asking price to their clients, appraisers also look at comparable properties for sale near the property being appraised. This means looking into the value of properties that cover about the same square footage and those built by the same builder and similar in style. At the very least, appraisers will compare the property to other homes with similar amenities, features, and quality of construction. Now, if there’s a property in the area that’s being sold for a ridiculously low price — if one family member is selling it to another, for example— then this can negatively impact the price that the appraiser will provide for the property in question. This can happen especially if the appraiser is not aware of the context of the sale. In this case, it would be a good idea for the homeowner to research the properties for sale in their vicinity and look into possible outliers that can impact the appraisal of their home. They can treat this as one of the essential steps to selling a home for the best possible price.

Current Economic State

The current state of the market is another uncontrollable factor that affects the value of a residential property. Aside from analyzing the historical price of the properties in the area, appraisers also try to determine the supply and demand for properties in the near future. This can also help with determining the market value. This benefits both sellers and buyers, as the price of the home should include all the future benefits that its new owner will get to enjoy. Among the factors appraisers need to consider to make this decision are the country’s current GDP, income growth, unemployment levels, and economic activities. The current interest rates also come into play, as this number will determine whether or not the mortgage will increase in the foreseeable future and if the demand or price of real estate properties will see a downward turn.

Controllable vs Uncontrollable Factors

Homeowners who want to get the best value for their home need to make an effort to maintain and improve the property before they get the services of an appraiser. At the same time, they should also be aware that there are pricing factors that neither they nor their chosen appraiser can control. It’s a good idea for homeowners to talk with real estate appraisers beforehand and try to determine the features of their home that can hurt their appraisal. This way, they can adequately prepare the property for the appraisal.

By Monica Mendoza. Monica is a content writer and marketing professional who’s on the lookout for a new house. As part of her research, she’s taken a good look at how the real estate industry works and how she can find agents who can help her get a good deal. When she’s not working at home, she can be found baking and looking for new recipes online.

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22 Responses

  1. Avatar Seneca says:

    Written like someone who likes baking and searching for recipes online.

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  2. Avatar Bryan says:

    Wow – so a family had there house appraised then removed traces of their race and had it re-appraised by the same Appraiser within the time parameters that did not allow for any market changes and it appraised higher after said removal? I’ll be like a guy from Missouri – show me. Oh wait – it says homeowners (plural). Just like an Appraisal – explain where you got the data and how the outcome was determined!

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  3. Avatar Phillyapp says:

    While a fresh perspective from a guest writer may be informative at times, publishing an article with factual errors about appraisal practice undermines the profession.

    The guest writer is not in the field and is clearly uninformed as to the appraisal process. The article grabs you with a sensational accusation of racial bias, without a frame of reference, directs you to an advertising site and then attempts to define issues in the appraisal process.

    Please review content for this type of misinformation in the future.

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  4. Ms Mendoza is apparently unaware that in virtually every single case of alleged racism to hit the media recently; admitted staged events were in play.

    One could argue staging was necessary to identify if a valuation difference resulted from perceptions of what race the occupants are. Fair enough.

    Provided that the staging itself does not alter the value scenarios. Provided that the results are being honestly reported. I’m skeptical. I’ve researched each case as far as can reasonably be done from the information provided.

    The American Guild of Appraisers has also offered (repeatedly) to conduct thorough reviews of each and every appraisal involved in the reported instances to date. So far there have been no takers.

    Without exception, each new instance (or articles on them) cite the thoroughly debunked Brookings Institute Studies on the topic.

    Also, without exception as far as has been reported not one case was submitted to state appraisal regulators for analysis and review. Instead, even on non-FHA transactions, complaints were made to HUD alleging Fair Housing Act violations. In one instance I have seen the email correspondence back and forth between the HUD “investigator”
    and the appraiser. I also read the appraisal. No sign of a smoking gun. No sign of racism in my extensive conversations with the appraiser (over several hours). He seems like a well-trained, thoroughly conscientious appraiser with more than 20 years of experience. He has never had a complaint filed against him before. He is only interested in performing to the best of his ability and feeding his family.

    HUD refused to cite the specific authority they are operating under in demanding to see his work file as well as all the appraisals he has performed over the past six months. His attorney suggested HUD MAY have such authority under the Fair Housing Act(s). Any reasonable person knows it’s a fishing exercise.

    In doing my own research it appears that the concept of “disparate Impact” is or will be applied. That’s a concept where even if he has done NOTHING wrong, he can still be held liable for the ‘disparate impact’ of ALL OTHER appraisals done by all appraisers in the complainants ‘area’ if they show black area appraisals are lower than white area appraisals.Yes. He CAN be sanctioned (fined) or charged with violations of federal laws.

    Market location preferences be damned.

    Of course, HOW that area is determined to be relevant is not disclosed. Defined neighborhood? Competitive market area? Adjacent census tracts? Also, what value definition will be applied? The one used by virtually all loan transaction appraisers, or some Department of Justice; HUD, or Treasury Department variation such as “FMV” wherein exposure time is not a factor?

    Recently, I watched a YouTube report citing yet another of this alleged race-based disparity in appraisal claims. from Canadian ABC TV.

    It starts off with an alleged “valued $65,000 lower” than subsequent appraisal claims. It strongly inferred that there really was no difference at all except the appraisers and the race-reflective staged interiors.

    (1) Three appraisals were obtained with no disclosure as to how they came to be ordered or by who. By lenders? By AMCs? By the owner direct?

    (2) The stage-owners or residents were Black, Asian (Indian), and White. Interior decor was modified between each appraisal to reflect pictures and possibly other cultural or racial identifiers of undefined descriptions.

    (3) EACH appraiser involved an exterior-only inspection by the three different appraisers. Some certainly seemed more detailed and attentive than others. As is normal.

    Each appraiser measured the exterior. The resulting GLA each calculated was never reported. Nor was the standard to which the measurements conformed. ANSI? Some Canadian standard?

    (4) Interior conditions of the property were provided solely by the alleged (staged) owners by pictures of their composition and choosing.

    (5) Not one of the appraisals is reported to have been subjected to independent professional peer review. They are instead tried in the court of public opinion. By people with no appraisal knowledge. By people that MAY have ulterior motives.

    The appraised values were: $1,450,000; $1,415,000 and $1,385,000 (a variance of 4.48% from high to low or 4.69% low to high.

    LESS THAN 5% variation between each appraised value. ALL three values would reconcile with each other.

    To have a less than 5% variance between all three values of an over a million-dollar property based on an exterior observation is indicative of GOOD APPRAISAL WORK by all three appraisers!

    ABC failed to identify normal appraisal variation ranges. Especially normal variances in over million-dollar properties.

    The entire article was couched and presented to infer racial bias caused a Black Homeowner to be deprived of $65,000 in equity.

    Admittedly it’s Canada. That historic hotbed of racial discrimination going back to its founding. Where blacks, Asian-Indians, indigenous Indians, French, and so many others have been racially profiled and repressed for so many centuries. The Canada where racism was so rampant that they had to fight a civil war over it. [sarcasm for those unsure]

    Where there IS no Fair Housing Act and appraisers don’t have to follow American USPAP rules.

    A variance of less than 4.7%. On a property transaction range where multiple appraisals are the norm rather than the exception because it is common for there to be some variance.

    In the end, we are left with the impression that clearly hidden racism accounted for the differences. Rather than normal human perceptions or OPINIONS. Or differences in measured living areas.

    I know of no systemic racism practiced by any appraiser. I have never observed it. Not in 35 years of appraising. I HAVE heard (read) where certain Automated Valuation Models (algorithms) are weighted based upon demographics.

    Demographics required to be reported under Fair Housing Laws via census tract numbers to facilitate monitoring.

    Census tract numbers prominently cite racial mixes of the populations within the census tract.

    IF there is ‘systemic racism’ then I’d urge our regulators to look to the probable source of it rather than innocent professionals. That source is the Federal Government.

    Census tract numbers are the ONLY place in an appraisal report where the specifics of race and a whole host of other prohibited demographic considerations are (indirectly) identified in any appraisal.

    Keep promoting the false narrative of systemic bias in real estate appraisal, and eventually, real bias MAY result.

    How many appraisers will decline or withdraw from appraising black-owned houses completely rather than risking frivolous but crushing HUD investigations? How many appraisers will suddenly realize they ‘lack competency’ due to ‘observed complexities’ at the subject property? USPAP demands that they withdraw if at any point they realize they cannot complete an assignment due to its complexity being beyond their expertise.

    I’m not suggesting this will happen. Merely that it might. Most appraisers are professionals and have not bought into this alleged systemic racism in appraisal myth yet.

    Another side of the same coin is that if “these” imaginary racist appraisers truly hated other races, then wouldn’t it just be (hypothetically) easier to conclude whatever value is being sought? Avoid the risk AND set the oppressed up to become overburdened by debt?

    OR appraisers MAY just start suing originators of the false claims. Or the deep pockets media that keep hyping the narrative.

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    • Avatar don says:

      Well analyzed and written Mike.

      3
      • Avatar Seneca says:

        I agree, But who is Mike writing to? Who is Monica? Does Monica care? Does Monica exist? Is this a real article? Is this an article just to get under our skins? Why is AppraiserBlogs publishing an article of someone who just now thinks the know what factors might go into developing an appraisal. Strange article to see post here.

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        • Phylliap and Seneca, our intention in publishing this article is to show everyone how uninformed people are and how easily they are manipulated into believing the mainstream media narrative about appraisers and racial bias. We were hoping that appraisers would take the time to refute and educate, just like Mike did, instead of attacking the author. We’ve been seeing an increase in traffic of non-appraisers visiting our blog. We’ve also been receiving a more than usual amount of emails from these folks. It should be obvious from the many articles we have published on this subject here on AB, where we stand when it comes to the racial bias in our profession propaganda. We must be open to have these sort of discussions with the consumer. Why not have it here since other platforms have and will continue to censor us/our comments?

          1
          • Avatar Seneca says:

            “our intention in publishing this article is to show everyone how uninformed people are and how easily they are manipulated into believing the mainstream media narrative about appraisers and racial bias.”

            Well how about stating these intentions and motivations not leave it open to wonder why an article like this makes it this site.

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            • We thought it was pretty obvious! Mike picked it up.

              1
              • Avatar Phillyapp says:

                I did not attack the author, I questioned the posting of such a ridiculous article that was written as an advertisement piece. Your posting of this type of garbage only enforces the false narrative if racism in appraisal.

                Thank you for explaining your reason, but I stand by my original request that you review this type of article prior to posting misinformation.

                Feel free to deny my request, but please refrain from categorizing my post as a personal attack.

                0
  5. Avatar Kim DeFilippis says:

    Monica needs to stay in her lane.

    2
    • Agree (with all the posts here on the issue) however, THIS is the kind of ‘news’ or opinion pieces that are circulating in almost all venues.

      We need to factually refute them every time. It’s not so important as to what other appraisers believe as it is important to know what the public believes.

      2
  6. Avatar JULIO E SUNE, JR says:

    “There is only one duty, only one safe course, and that is to try to be right and not to fear to do or say what you believe to be right.” [Winston Churchill]

    I have been in the Appraisal Profession 41 years….I DO NOT know of ANY systemic racism ever practiced by any appraiser.

    ENOUGH!!!!!

    These false claims/allegations have to STOP!!!!

    So…”OR appraisers MAY just start suing originators of the false claims. Or the deep pockets media that keep hyping the narrative.” [MF]

    3
  7. Avatar LMD says:

    13% of the population identify as black. Per the FBI crime statistics the 13% commit over 50% of the homicide rates. 13% are responsible for over 90% of the interracial murders. 100% of the media and social media will tell you the 13% are the victims of systematic racism yet the places the 13% do the worst are in historically democrat run cities and cities with a high rate of black politicians. Now looking at the bigger picture with an analytical mind one can only derive the issues that adversely impact the 13% can be blamed on the democratic party and the 13% themselves. There is a lot of money to be made by continuing to victimize the 13% and vilifying whites. At the end of the day it’s time to ban together and remove the problem! Vote democrats and crooked politicians out of office. Hunt down the source of the money that funds these disgusting politicians. Hold the media and social media propaganda machines to the flame! Go back to a time where we judge those on the content of their character. Praise those who do good and punish those who do bad. So simple! If anything I said offends you then you are clearly the problem!

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    • Mike Ford Mike Ford says:

      As appraisers, we keep non appraisal opinions non partisan to the extent possible.

      The membership of the American Guild of Appraisers is comprised of professional appraisers whose personal political views are as diverse as those found anywhere else in America.

      We cannot be effective if we were to insult half our membership. Im pretty opinionated in other, non appraisal forums. Readers there expect partisan positions.

      They aren’t constructive here. Our goal as appraisers here is to improve the conditions under which appraisers operate; AND to preserve the traditional reputation professional appraisers earned for independence and integrity.

      Both are bipartisan objectives.

      3
    • Avatar don says:

      13% of 50% and 13% of 90% equals an average 9.1%, Allowing appraisers to PREJUDGE the remainder as criminals and murderers. We are appraisers, and not; social scientists or, arithmeticians or media executives, and we can’t explain the politicians position with his population. However the politician can make laws

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      • Baggins Baggins says:

        95% of all statistics are made up. It’s all about how you review and parse the data. 100% of all persons with a mortgage loan do not actually own their home, but rather are carrying the burden of debt for a lender owned title. They do not enjoy complete home ownership and all the rights which come with it. That’s one statistic you can count on. You don’t own it, until the last payment is made and the title indicating so is safe in your personal vault to protect one from MERS clouded title kickback. Even then, they’ll yank it out from under you if one fails to pay county taxes or gets habitability and code violation notices for not keeping it up and not maintaining utility access. To voluntarily want to reset a loan term and pay a higher amortized cash equivalency rather than take out a short term loan to fund improvements and what not, risky business.

        Some owners keep track of every dollar spent on maintenance over the life of their loan. For very well managed homes that maintenance figure often crawls so high, a substantial portion of the actual sale price. That $300k home will eventually require a $20k roof, $10k plumbing, $15k sewer line, $15k electric overhaul, $10k fence, $15k drive & concrete package, $10k windows, repeat rounds of $3k+ carpet floor allowance, repeated rounds of $3k hvac utility systems, paint, equipment, cabinets, appliances, kitchen and bath overhauls, drywall, landscaping, sprinkler systems, the list goes on and on and then the thing you fixed so many years ago, needs replaced again and again. All the time your utility bills keep climbing while the central planners diminish your earnings and purchasing power.

        1
        • Baggins Baggins says:

          Second photo. So lets’ summarize the appraisers are racist issue from a different perspective. Some lenders and institutions which work with lenders out there are eager for an increase in housing subsidies because it would be profitable for their corporate interests… Where have we heard that before and is there any historical reference from recent periods which may provide some valuable insight….. It’s called over investment in housing, and it’s happening again. The government needs to get out of the business of lending and insuring of American housing. Burying quantitative easing in housing can’t last forever, fully out of control, what’s a few more trillion on the balance sheet among friends. Prices are up, value is not. The failing dollar. “When I print trillions of dollars, I buy mortgage backed securities.”

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          • Baggins Baggins says:

            Cost estimate update. I was a little behind the times on hvac cost estimates. Just got a full home quote for my 1200 sq ft ranch, new 80% 2 stage ECCM furnace and 16 Seer AC, with duct work, electric, supply, flue lines, pad, air flow package, new under box. $10,000.

            I’ll look forward to possibly having to do that all over again 10 to 15 years from now, if it holds up without some repairs in the meantime. The cost of maintenance if not expended, transforms into deferred maintenance estimates, which has a direct negative effect on value analysis.

            Sometimes you get lucky though. I ran that old 1970’s AC unit without regret and I ran it day and night all the time regardless of it’s efficiency. I never spent a single dime on it and just brushed off all contractors suggestions to replace it. Then one day…

            0
            • Avatar don says:

              Glad to hear you will be warm this coming winter, Hope your water supply holds out and the fire presents no danger. I had read in the history books that the caves were drafty and sharing a bearskin also had limitations.

              Ain’t nothing free!

              0
  8. Baggins Baggins says:

    The ‘appraisers are racist’ is a movement to codify and monetize advocacy efforts for loan relief and subsidized purchase activity into permanent legal status. Not being equally applied to all Americans with loans, but rather the new subsidy applied to limited groups of such persons in certain areas. The banks which distribute EBT welfare cards get 15% off the top, the same will be true for subsidized housing based on race. It’s a potential cash cow which is why some institutions are pushing this in popular media. Government subsidies represent taxation without representation to most of us.

    The contention here appears to be a misconception that the appraiser has a play in driving market price and values with possible individual biases, which we do not. The participants set the market, we just observe and report from the same locations where buyers buy, and sellers sell.

    When I complete a mortgage lending appraisal meant for end delivery to GSEs, there is an untold volume of analysis applied to my appraisal reporting. The ordering companyruns automated and human review. A middle amc manager may review again. The report may go field review to another appraiser, is reviewed by a desk appraiser. Then to FNMA CU (Collateral Underwriter) auto review system where conclusions are checked against the body of other appraisers in the blind (XML reporting overlays for data mining aka mismo). The appraisal, being tied to a loan package, is bundled into a larger mortgage loan portfolio and the investors at the top of the financial ladder review all the appraisals manually or with digital tech systems again. Appraisals that red flag for errors may get kicked down to a forensic review company staffed by appraisers. If an individual defaults on a loan, individual review is again applied. Then if in default, appraisals are reviewed again by a default management company during reo disposition phase. If someone refinances out of a loan into another, a high probability of additional after the fact review. The state regulatory agencies review appraisals in the process of approving each individual appraiser applicant for a state license. The agencies also review random selections of appraisals under certain circumstances as a normal recurring yearly activity in many states. And then….. People read our appraisals at closing tables and in other locations, often sharing them beyond the restricted scope of work and stated report use restrictions which are there to protect confidentiality of sensitive data. There are no secret methods in appraisal reporting.

    Being an appraiser is not all that difficult. One only has to read and retain about 10,000 pages of government guidance and strict process compliance mandates. Appraisal is at it’s core, not about people, but about contract law, bureaucratic compliance with underwriting and lending rules, with a substantial requirement to be very well informed on construction, buying, and selling activities, and credible analysis of such activity surrounding any given class of real property. Form that into a report. Appraisal is like never ending data analysis homework.

    Here, read this: Protect yourself first. People need to stop treating their homes like atm’s and living on credit because the financial systems are unraveling in real time.
    https://schiffgold.com/commentaries/inflation-crashes-the-party/

    I liked your article Mrs Monica Mendoza. Thanks for participating. Fresh content is always appreciated. Some took offense but I have not. Housing is complicated and helping people become better educated is always a worthy effort. Homes are money pits, at a certain point in their life, they become incredibly expensive. The sad truth of housing is that most people put far more cash into homes than they will ever get out of them. It’s just the cost of owning, but the benefits of ownership reach so much further than price. Appraisers abide Dodd Frank rules on ‘separation from loan production’. The lenders don’t get to pick which appraiser they use and appraisers don’t get to selectively choose which orders come their way. If an appraiser dared to alter value approach principals based on character identity, they’d get lost in their own process errors and washed out by the review systems. Make sure you know what you’re singing into ahead of time. Caveat Emptor.

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4 Uncontrollable Factors that Can Affect Home Appraisals

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