Alleged Systemic Racism in Appraisal Myth

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Michael Ford
Latest posts by Michael Ford (see all)

Alleged Systemic Racism in Appraisal MythIn 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.

…alleged systemic racism in appraisal myth…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.

Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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26 Responses

  1. Avatar MD appraiser says:

    Well written Mike! And yes maybe we should start suing originators of these false claims and the mainstream media selling these lies.

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    • Mike Ford Mike Ford says:

      Thank you. Certainly we need to correct the record whenever this specific manufactured scenario rears its head.

      I urge ALL appraisal organizations and State Coalitions to offer free appraisal review anytime this particular chimera is presented as proof of purported racism.

      7
  2. Avatar Dustin Harris says:

    Some of the best writing I have seen on this subject so far. Well done Mike! Excellent, excellent job.

    5
  3. Avatar BoB says:

    Excellent piece Mike. So sad that many of the higher profile voices in our profession don’t have the cahoonas to step up to the plate for our profession as relates to the nonsense being spewed regarding those “damned racist appraisers”. You know, the ones that get to a house on a paying assignment and think to themselves, “I’m gonna exercise my white privilege and I’m really gonna lowball this value to throw a gut punch at this minority family”. The only color capitalism sees is GREEN. To combat any stray debate the word “unconscious” was subsequently added to the accusation….the attempt being to squash any rebuttal before it can get started, i.e. you’re too dumb to know your you’re gonna lowball the minority family. Sadly we have few voices that have your guts. The assertion being presented with the current narrative is a false one. It states that statistical disparities are unequivocally the result of the damned racist appraisers. Statistical disparities can be the result of a thousand different things. The NBA is widely predominantly black (75% to 16% white). There are no 5′ 6″ tall white Jewish guys in the NBA. It’s racist! It’s anti-Semitic! No, while statistically it’s true….it has nothing to do with damned ol’ racist or anti Semitic coaches. The whole thing is becoming a farce, but I guess the appraisal profession should have foreseen that it too was not going to be able to avoid being the target of the divisive piling on.

    4
    • Baggins Baggins says:

      You were born. Just in time. To fight race war. It really is over the top these days. To the point people are finally learning to simply ignore the baiting. What exactly is wrong with lower housing pricing? The narrative falls flat without any injection, as if we’re all cheer leading for increased housing pricing, rampant inflation, and everything to cost more money and pay higher taxes forever. Give me a break! Audit the fed.

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      • “Affordable” housing is only important when folks are buying. When they are refinancing, accurate analyses of those affordable houses is unwelcome.

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      • Avatar don says:

        Mr. Baggins, your a research historian. Did Mike Fords referral to the French- Indian wars include our own George the first in his training days.

        1
  4. Avatar Mark Skapinetz AGA says:

    Well said and well done Mike. Excellent article.

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  5. Avatar Vince Kleinknecht says:

    Well done and well written Mike.

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  6. Baggins Baggins says:

    We just hope it all blows over soon. Fake news nonsense steering people to the belief appraisers being racist and implicitly biased all the time. If you are out there thinking this about appraisers, I dare you to try it and do a better job yourself. Press your luck because every other request is a potential whammy. Appraisers be like; what the hell just happened?!

    5
  7. Wyatt Powell on Facebook Wyatt Powell on Facebook says:

    It would of been nice if the author did some actual research on the appraiser’s who performed the reports, the reports themselves or those who ordered the report. Then we could at least have a bit more than just a pissy opinion piece……

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    • Spoken like a true Black Knight defender, or uninformed layperson content with their own ignorance on the topic!

      I have researched each issue to the extent that the information is available. We (AGA) have a standing offer to arrange for a free appraisal review to any of these accusers willing to submit the appraisals to professional scrutiny. If we are insufficiently impartial as a result of having written critical articles on the subject, then there are numerous other professional organizations and state coalitions willing to do the same thing.

      I have also directly consulted with an appraiser accused of racism for allegedly having ‘come in low’ on one of these phony setup claims. That included a review of his work.

      2
      • Avatar don says:

        Mike , we need a trio to review any reports, The fear of contradiction, among a defined group is more believable.
        A WSJ letter this week questioned congress about journalists defensibility, for verifying facts ” impossible to prove”. We appraisers have to show our verifications.

        1
  8. Avatar Donna says:

    Excellent job Mike. Thank you for all of your hard work and dedication to our profession when others just throw us, the unbiased, under the bus. Maybe force all borrowers to take a class to educate them on how appraisals work prior to their deal closing.

    4
    • Thank you.

      Common sense solutions are not desired by the people promoting these lies. They are capitalizing on the federal government’s confession of systemic racism being a widespread practice in America since the Civil Rights Act was passed. Now, these two words have become the necessary buzzwords for any efforts to mobilize federal regulators to adopt any new policies ranging from Covid treatment to Housing and FInance issues.

      I am exceptionally contemptuous of appraisal software developers seeking to hustle their bogus appraisal ‘alternative’ snake oil.

      They never go away. They merely latch on to new buss words like ‘value added’ & ‘leveraging’ or climate change in the past. Now its systemic racism.

      Not that the latter two phrases don’t deal with important issues, but they have never been foundational issues with or for real estate appraisals.

      There are a number of articles written here in Appraisersblogs addressing these hucksters. I’ve written a few. Others have written more.

      4
  9. Avatar Julio E Sune Jr says:

    Most Americans think they can spot fake news. They can’t, study finds

    https://www.cnn.com/2021/05/31/health/fake-news-study/index.html

    “In all, these results paint a worrying picture: The individuals who are least equipped to identify false news content are also the least aware of their own limitations and, therefore, more susceptible to believing it and spreading it further,”

    1
  10. Avatar Bill Johnson says:

    Seek the truth, spread the truth, and hope others don’t censor the truth.

    1
    • Mike Ford Mike Ford says:

      Bill after the expected Tulsa speech today its going to take more than seeking.

      We ALL need to start writing rebuttals to the racist appraisal meme.

      Its whole point is to create “unbiased” trustworthy machine based valuations. Bypassing Congressional debate under the guise of ending alleged systemic racism.

      2
  11. Avatar Evil Empire says:

    Boycott all ghettos don’t service them

    1
    • We don’t do that. Hopefully, we don’t identify them as even being ghettos, or barrios or gangland…though I personally live in two out of the three I noted.

      It’s never valid professional consideration.

      2
  12. Avatar Julio E Sune Jr says:

    We all lose when misinformation sells more than truth, when moral exploitation sells more than decency.

    There are just too many arbitrary news-media articles on appraisal racism that have been made without facts and circumstances presented, and it connotes a complete disregard of the evidence.

    There is NO TRUST when image is chosen over INTEGRITY, business convenience over TRUTH and company gain over CREDIBILITY.

    1
  13. Avatar Bill Johnson says:

    This madness has to stop.

    True story, I’m doing an appraisal review (refinance) where I’m going to be cutting value by $50,000 to $100,000 and I can’t stop thinking about the borrowers skin color. If the borrower is of a certain race will I be called a racist if the loan doesn’t go through? Will it matter that I never met the borrowers? Should I assume, and falsify my report to protect myself from potential liability? Should I change my mind and rubberstamp the original appraisers value? If the borrower is white, and the original appraiser is white, and with a high original value is one or are both white supremacist? Why didn’t I know how to spell supremacist, and why was I afraid to have a digital footprint when I Googled how to spell it?

    Stop the madness, and Seek the truth.

    3
    • Avatar Mark Skapinetz AGA says:

      Very valid points Bill. I actually agree with you on this and now we are seeing the effects of this trickle down into other areas of the profession. It’s not going to get any easier either.

      4
  14. Avatar JULIO E SUNE, JR says:

    AND THE BEAT GOES ON AND ON AND ON!!!

    Biden-taking-aim-appraisal-bias-housing-disparities?

    “Appraisals: Biden says a Brookings study in 2018 found that “homes in majority-Black neighborhoods are often valued at tens of thousands of dollars less than comparable homes in similar – but majority-white – neighborhoods,” and that the “crisis is worsening.”

    In this week’s announcement, Biden said he asked HUD Secretary Marcia Fudge to create a first-of-its-kind interagency to address home appraisal inequities. He said the goal is to use “the many levers at the federal government’s disposal,” including:

    Potential enforcement under fair housing laws
    Regulatory action
    New standards and guidance created in partnership with industry and state and local governments”

    INTERAGENCY = Appraisal police?????

    1
  15. Looking out for our industry and all of our backs. I truly appreciate the opinions of a seasoned, educated and lucid mentor. Thank you.

    1

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Alleged Systemic Racism in Appraisal Myth

by Michael Ford time to read: 5 min
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