Our Job Is to Observe & Report

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Our Job Is to Observe & Report... Not to Commit Mortgage Fraud

Our job is to observe and report. For an appraiser to arbitrarily go into another area to get “comps” merely because it would result in a higher value is an act of fraud…

Dear President Biden,

Sir, I welcome your incoming administration, and my sincerest hopes and well wishes are extended to you in terms of healing in this nation. Additionally, as an appraiser, I welcome the desire for equality in housing opportunity in the United States, and if there is any bias in my profession, I support efforts to correct this. However, in watching your party’s position on race and housing over the past four years, I fear that there is a fundamental misunderstanding as to the roll of the appraiser, and to the level of bias that there “might” be in the profession.

Most notable were the statements made during the “What’s Your Home Worth? A Review of the Appraisal Industry“, in June of 2019. The desire for fairness at all levels of the industry is palpable in the questions, however, the recommendations that appraiser’s “fix” the problem of disparity in home values based on race is at best a drastic misunderstanding of the industry and at worst an attempt to coerce appraisers to commit mortgage fraud.

Appraisers observe and report. This is our job in short. We observe the subject home, the surrounding neighborhood and the market data, and we develop a report based on those observations that is consistent with best practices. The sad reality is that what we are observing in many cases is the fallout of 100 years of overtly the racist practices of race-based zoning and redlining.

In the city of Richmond, market value boundaries are still similar to the 1950’s redlining, which was based on the previous race-based zoning. This is a sad reality, but it is reality. For an appraiser to arbitrarily go into another area to get “comps” merely because it would result in a higher value is an act of fraud. Our job is to observe and report.

Mr. President, it is the job of legislators, with legal grounding backed by the judiciary, to pass laws that the executive branch can enforce, to correct this issue. My job is to observe and report. Based on my observations and reporting to organizations like Fannie Mae and Freddie Mac, you will see that data and know if your policies have had the desired effect.

Again, I welcome education on how appraisers can perform our task free from bias. However, please keep in mind that we are reporting data that displays the fraught racist history of this country in terms of housing.

Please, don’t shoot the messenger.

By Jesse Ledbetter is Certified Real Estate Appraiser and owner of RVAvalues.com with a background in philosophy, math, and teaching.

Image credit flickr - Ted Eytan

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25 Responses

  1. Avatar Kim DeFilippis says:

    Bravo!

    7
  2. Avatar Andrew Picarsic says:

    Exactly! We are only reporting the results of 30-50 years of failed Social Policy. This is why they are upset, so they are trying to deflect.

    7
  3. Kim Wright Bryan on Facebook Kim Wright Bryan on Facebook says:

    So racism and fraud is based on political affiliation? This new administration is going to fix it?

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    • Michael Perry on Facebook Michael Perry on Facebook says:

      Kim Wright Bryan you didn’t read the article

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    • Kim Wright Bryan on Facebook Kim Wright Bryan on Facebook says:

      Michael Perry this current administration has tried to convince the people that everyone is racist.

      5
    • Kim Wright Bryan on Facebook Kim Wright Bryan on Facebook says:

      Michael Perry hybrid appraisals are the answer…

      2
    • Michael Perry on Facebook Michael Perry on Facebook says:

      Kim Wright Bryan this article is not about politics. If we want to protect our industry we need to focus on issues rather than take swipes at candidates we don’t like.

      5
    • Kim Wright Bryan on Facebook Kim Wright Bryan on Facebook says:

      Michael Perry but the photo is political ?

      It’s insinuating that this president is going to fix it. (Oh I forgot it’s only political if it’s not the current administration)

      When has anyone tried to focus on the issues and actually solve them?

      2
    • Michael Perry on Facebook Michael Perry on Facebook says:

      Kim Wright Bryan ugh. I get it but again it seems obvious that you didn’t actually read the article. It’s specifically addressed to the Biden administration and specifically cites their intentions to address the issue. It’s a plead for this administration and this president to stop insinuating that appraisers are causing the problem and especially that appraisers can somehow “fix” the problem. Please read the article.

      5
    • Virgil Gleason on Facebook Virgil Gleason on Facebook says:

      Kim Wright Bryan Not! I have done both sides of these hybreds’ and they are trash! You cannot get a true feeling for a home if you do not do the complete inspection, and write the report yourself, too much is lost in the process.

      2
    • Virgil Gleason on Facebook Virgil Gleason on Facebook says:

      Michael Perry I agree to keep politics out if possible. Why is a political sign in the photo above? Edit – I understand the sign now. I read the article before my initial post, just took a while to figure it out.

      2
    • Michael Perry on Facebook Michael Perry on Facebook says:

      Virgil Gleason thank you!! I think the author erred by using that photo because too many people only see the photo and read the headline. That’s all I was asking if Kim too.

      We’re appraisers – we’re supposed to consider all relevant info before coming to a conclusion!!

      2
    • Virgil Gleason on Facebook Virgil Gleason on Facebook says:

      Michael Perry I hope I did not appear to be mean. I am a bit on edge because I see more complexity coming our way, and I very much dislike being branded or labeled. Just the facts man, just the facts. Good luck everybody, I hope you have a great year!

      2
    • Michael Perry on Facebook Michael Perry on Facebook says:

      Virgil Gleason I didn’t take it as mean at all. Kim either. I just think we all need to have a basis for our opinions and I’m glad you took the time to read the article. We need to be more unified as an industry!

      2
    • Kim Wright Bryan on Facebook Kim Wright Bryan on Facebook says:

      hey guys…I don’t mean to be cynical but all I’ve heard for 20 years is “fear” ! Every word is scrutinized. Your integrity and knowledge constantly questioned. AMC’s bulling and threatening. Unreasonable turn times, threats to withhold pay,etc. It gets old!! I’ll I’ve heard is let’s stand together for 20 years…which I think we should. Then the appraisal organizations throw us under the bus too.

      Things were better the past several years than they had been in a long time then came Hybrids. Two of my biggest clients were pushing hybrid appraisals HARD right before COVID…then they completely stopped and we (appraisers) were considered “essential”. The loan officers tell the borrower, agents, etc it’s the appraiser. The list goes on forever.

      I’m not so sure this administration can fix it. Last time they changed one word in the FHA guidelines that cost hundreds of good appraisers their livelihood.

      I believe the only way things will get better for us all is when we get a huge lobbies group like the realtors have. Until then we will remain the little insignificant people unless needed. We can all be replaced tomorrow!!

      Money is the only thing that talks it seems.

      I’m not giving up yet. I am however doing everything to limit my liability.

      I wish us all a good year. I surely hope the housing market stays strong.

      3
    • Virgil Gleason on Facebook Virgil Gleason on Facebook says:

      Michael Perry Thank you. I am not sure unity is possible given human nature.

      1
  4. Avatar BoB says:

    Precisely. As an appraiser I don’t lay the Easter Egg. I don’t paint the Easter Egg. I don’t hide the Easter Egg. I’m simply asked by a Client to use my skills in deciphering data to find the Easter Egg. Once I find it I simply generate a report to the Client stating where I found it.

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  5. Scott Taylor on Facebook Scott Taylor on Facebook says:

    that is what I would like to ask, how do we “fix” this problem if we are merely reporting the current actions of buyers and sellers in that particular neighborhood? Do we ignore recent sales in that neighborhood and go to another neighborhood that has higher market values? I am confused.

    3
  6. Thanks to all for the comments. I won’t speak to politics, only that I didn’t choose the image that went with the article (mine can be found on rvavalues.com). Stay positive out there folks, we’re in this together! I have a follow-up blog you may be interested in coming out soon on red-lining and the city of Richmond that you may find interesting as well.

    2
  7. We all hold our own individual political beliefs. Some more strongly than others. Despite that (or because of it), the author is spot on.

    We have strong standards that are only weakened by the never-ending efforts to circumvent them. That is not from one party more than the other. It is a constant of our profession.

    No matter which party is in power we can only work within the framework available to us. When one party has control of the House, the Senate, and the Executive it is our best opportunity to achieve meaningful results. IF we identify them narrowly and pursue them in the context of that party’s more broadly stated objectives, rather than squandering opportunity by getting bogged down debating comparatively meaningless minutiae.

    Context has become more important than any other concern in recent years. We can present the same issue in two different ways and have opposite results. It’s no different than how an appraiser can report a fact contextually that may seem favorable or unfavorable to an underwriter.

    “The property is non-conforming and is obsolete.” vs the property “is legal non conforming, meeting lower-cost entry-level market needs and demands in the area where a shortage of entry level housing exists.” Context is everything.

    For example (& ONLY as an example-any topic could apply) We have sought reasonable & customary fees for years. We proposed it first to be a simple matter of fairness. Then we later addressed it as a necessity for assuring adequate time is spent and recognizing that time equates to money (fees) & affects quality.

    NOW identifying practices associated with low fees that MAY produce biased results would be prudent. Countering them in the same context is necessary. Buzzwords / focused topics become critical.

    Presenting solutions “To promote racial equity & social justice in housing values (or prevent its opposite) we urge all home valuations to be performed on the basis of full appraisals at reasonable & customary fees by qualified professionals as was originally required under Dodd-Frank (a Democrat bill).”

    “Using alternatives such as algorithm-driven automated models that are based on census tract demographics are inaccurate overall, and more specifically automatically incorporate lower market values based on census tract data rather than specific housing similarity.” “Some software designers have admitted to weighting demographics in their algorithms. Perhaps without malevolence, but certainly with great potential for discriminatory abuse.”

    The above is not THE argument. Its merely an example of a possible presentation from a perspective that gives a legislator a reason to want to support a given bill; or to oppose one.

    Lobbyists learned long ago that ‘right & wrong’ rarely enter into considerations. It’s the perception that doing a thing (or not doing a thing) promotes the politicians already stated objectives in some fashion.

    The current Presidential (& Congressional control) contest is over. That’s a fact. No matter what our personal political beliefs (pro or con) we have to operate in the world that exists.

    5
  8. Avatar Anon says:

    I’m not sure how many of you are aware; there was a seminar on January 13, 2021 “Unconscious bias virtual session for the appraisal profession” that was sponsored by ASA/AI/ASFRMA/MBREA/and NSREA. The goal being to address unconscious bias. It is very clear that the people leading the conversations have no clue what it is appraisers do. It’s clear that those beating the drum are virtue signaling because the data just doesn’t support the infamous NYT article that has now become gospel.

    At one point during the seminar it was suggested by the one of two leaders that appraisers should increase the prices of houses for African Americans who have been marginalized as a way to make up for social ills. I had to pick my jaw off the floor. Despite this being fraud, and a violation of USPAP and FIERREA I have to say, the gentleman didn’t seem to even realize what he had said was fraud. I think social equity programs are necessary; if a law is passed that mandates appraisers need to correct for certain factors, that would not result in appraisers committing mal-practice.

    I would also add this was a hearty nudge by a large international bank for appraisers on its panel to participate.

    Again, these are not my feelings (because those don’t matter); for those following the new AEI report on bias in appraisal (spoiler, there’s no evidence for it) – https://www.aei.org/how-common-is-appraiser-racial-bias/

    For a review of the data by the study designers (it’s about an hour presentation): https://www.aei.org/economics/special-briefing-on-appraiser-bias/

    3
  9. Donna Halfpenny on Facebook Donna Halfpenny on Facebook says:

    Please send this to the Chicago Area Realtors. They are soliciting appraisal bias stories (but not facts, just stories)

    2
  10. Vince Vaughn on Facebook Vince Vaughn on Facebook says:

    Kim, I don’t miss it at all!

    0

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Our Job Is to Observe & Report

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