Appraisal Bias – A Counterpoint

Appraisal Bias - A Counterpoint. 
  1. It is a fact that 85% of appraisers are white with the majority of them being middle-age white men, although that is rapidly changing. The bias argument presupposes they are inherently more biased than women, Hispanic, African American, Asian, Pacific-islander, etc. We simply don’t have enough data to verify whether this is true or not. Therefore, as the argument goes, white appraisers must be biased. Just as there are more black NFL players in professional football it follows that the majority of touchdowns will be scored and fumbles made by a black player. We can, and should, encourage more diversity in our ranks but that doesn’t automatically mean new recruits will be free from bias, nor does it mean white appraisers are disproportionately biased. If you need heart surgery, presumably you would seek out the best surgeon, regardless of his or her race.
  2. Interestingly, the National Community Reinvestment Coalition (NCRC) conducted a “mystery shopper experiment” in 2022, in Baltimore, with the item being a residential appraisal. It concluded that appraisers are racially biased. The experiment tested how appraisers would value the home based on race, on who answered the door. One key data point that the NRCR experiment does not disclose is that the two most glaring examples of racial bias were performed by the same appraiser. If this one appraiser were removed from the study, the data flips the other way. More glaring is that this one “outlier” appraiser who was so pivotal in skewing the data, is Black.
  3. There are about 70,000 licensed appraisers and about ten million appraisals were performed in 2021 in the U.S. The fact that “dozens” of cases of bias (per the New York Times) have been alleged, let alone proven, is remarkable. While a single case of bias is lamentable, the fact that less than 0.0004% (four ten-thousandth of a percent) of cases are alleged to have been biased is clearly indicative of how unbiased our profession truly is. Further, it is a testament of how critically important our work is against the backdrop of pressure from all sides, coupled with our meager compensation. A SIX SIGMA result should be celebrated and held up as a de facto standard for all professional practice groups.
  4. The typical residential real estate appraisal is about 30 pages long. Let’s assume there have been six dozen cases of alleged bias (“dozens”, per the New York Times). The stack of allegedly biased appraisals would stand about 9 inches tall. If all ten million appraisals were stacked on top of each other it would stand almost 19 miles high.
  5. It is a fact that redlining created artificially depressed “islands” of poverty, educational vacuums and listlessness which contributed to a lack of opportunity for property owners to trade up and capitalize on the American Dream. However, these practices ended decades ago. Community block-grants, opportunity zones, zero-down loan programs, and other government incentives have disproportionally aided these neighborhoods benefitting historically disadvantaged minorities as well as recent immigrants. Property appreciation in lower-income neighborhoods has actually outpaced mid and upper-tier neighborhoods in recent years. For more than 50 years, federal law has forbidden racial, religious, and other discrimination in home appraisals. Bottom line, the vestiges of redlining have zero bearing today.
  6. The bias narrative relies on straw-man arguments and faulty data such as the widely discredited and non-peer reviewed Brookings Institute Study by Dr. Perry. It is a fact that neighborhoods are different. It is our job to measure and analyze the actions of buyers and sellers. We do this by analyzing individual trades, not simply broad statistical or empirical data (ala Zillow). If one neighborhood sells for less than another, we measure it using paired sales, regression analysis or other techniques, document and adjust for it. If homes in the lower-priced neighborhood were consistently undervalued, there would be a line of investors waiting to swoop up every house in that neighborhood, flipping them for a profit. And if homes in higher-priced neighborhoods were consistently over-valued, we would see mass defaults and foreclosures.
  7. Appraisers are people. We are trained and required to analyze the actions of buyers and sellers in the marketplace. By juicing the appraisal process with socio-economic scoring, restorative valuation measures, etc. we would be injecting further biases into the market which would only lead to value distortions going forward. Who would buy a bundle of mortgage-backed securities containing a substantial number of biased property valuations? We must resist efforts to gerrymander the appraisal process.
  8. Posturing will not solve the problem. The current debate violates every tenet of the Socratic method of critical thinking. “What’s it worth?” should be the ONLY question licensed appraisers are charged with solving.
Rep. Maxine Waters: House Financial Services Committee hearing on October 24, 2007, during debate of H.R. 3915:
“. . . a delicate balance must be maintained between protecting borrowers on one hand and encouraging innovation in mortgage lending and sustaining the critical secondary mortgage market on the other. H.R. 3915 strikes this balance. Perhaps the most important steps the bill takes are to impose a Federal duty of care on mortgage originators and minimum standards on all mortgages. It is clear to me that we need to prevent the now widespread practice of getting people into loans they can’t afford.”
By Veteran Appraiser, 35+ years experience

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14 Responses

  1. Avatar Deborah L Smith says:

    So well said, I completely agree. The NY Times article written by a journalist said she proved bias by setting up a house that took family photos away before it was getting an appraisal inspection and had the white husband answer the door, while black wife was not there. This was a set-up and a sham. As long as banks have us do their quick turn around time, low fee form-filling reports, the AMCs who steal our fees, and lobbyists, we will have red-lining. More detailed reviews are needed. Less politics in our work from greedy banks. Our profession was created to allow a check on home loans after the Great Depression. We are a neutral third party. To make us work for peanuts, conform to Fannie/Freddie is absurd, so they can rely on algorithms and Artificial intelligence, I read the tea leaves, and this modernization effort will further erode our third-party role, and degrade the prosession. Some are proposing we are to blame for blacks having lost generational wealth. I believe in paying reparations, and by other ways directly compensating for slavery, but let us look at Behavioral Economics because it is not all a numbers profession, but an art helping us carve out the value, and a study of social preferences tempered by economics. People buy houses. Let our country find ways to build more dwellings based on what will take homeless and less advantages off the street. All neighborhoods would improve and be more desirable.

  2. If there isn’t a study of appraisers by “years licensed/certified”, you will never convince me that we aren’t diverse. Lets take a look at how many appraisers have been licensed for less than 5 years, between 6-10 years, 11-15 years and so on. For goodness sake, we analyze data, let’s demand some data. Accepting the narrative that we aren’t diverse is feeding this rampant issue that is causing all kinds of “alternative” methods to be invented. All that will make someone else more money, all the while harming consumers and the mortgage industry.

  3. Well this is the most succinct and factual post on this topic yet. Agree 100% on all points. Especially on the point that if homes were all undervalued investors would scoop them up for profit and if properties were overvalued, foreclosures would ensue.

    I plan to share this with all the Realtors I know who have been told by NAR that there is an Appraisal bias issue….NOT! Also on all social media in which I am active. People need to understand that they are going after the messenger here and that there is zero support or proof of systemic bias. We report what the buyers/market is doing, period end of sentence.

    I love the visual of 9″ tall vs 19 miles high on those supposed biased reports per the New York Times.

    Also funny how the one outlier Appraiser was Black in the secret shopper exercise. I just discussed this very incident this past weekend on a radio inteview with our local station here in Georgia. You know that this important fact will never make it to main stream media, Congress or the Administration because it does not fit the BIAS narrative!

    Share this one far and wide as the PUBLIC deserves to know the truth!

  4. Avatar Mark says:

    Nailed it; well written. I especially liked this point:

    “If homes in the lower-priced neighborhood were consistently undervalued, there would be a line of investors waiting to swoop up every house in that neighborhood, flipping them for a profit.”

    Right? Why wouldn’t evil white people exploit the black homeowners by buying up their homes and flipping them for a profit if just being white got you a higher sales price?

  5. Baggins Baggins says:

    Blacks were not the only one to ‘have lost generational wealth’. We all live under the federal reserve. Devaluing your money with a target goal of -2%, year after year after year. The federal reserve has been feeding first receivers of money special favors for over a century now, trillions upon trillions of ‘lost value’. There would be prosperity for everyone if not for our corrupted monetary system and the private non federal corporations whom decides entire groups of societies financial and social outcomes from behind closed doors.

    Do we really need to talk about slavery again and why would a poster even mention that? If you want to see contemporaneous examples of slavery, just hop on down to the Rio Grande. Open border policies have placed a minimum of 80,000 people into human trafficking situations this year alone, perhaps far more. It may be slightly early to talk about reparations, if we as a country are still to this day engaged in sanctioning human trafficking. And then if we finally could get a handle on these issues, it would still not be time to talk about reparations, because that would be taxation without representation. As long as the federal reserve continues to print money backed by nothing, we’re all financial slaves to these systems and nobody except the elites actually win. Get your mind around it. Please keep in mind, every single other American by your side is deserving of some measure of reparations too. Perhaps we could start with eliminating federal taxes?

    For people on the outside looking into the appraisal industry; This mystery shopper deal is not even remotely scientific or an appropriately crafted ‘study’ of appraisers reliability. That home valuation request needs to come from a lender directly to an appraiser to have any real meaning or relevant bearing to their claims of appraiser bias in mortgage lending. If people source their own appraisal, those appraisals are not allowed to be used for mortgage lending purposes. So appraisers may not necessarily treat the openly sourced requests the same way and with as much gravity as when a lender orders directly from an appraiser and underwriters are scrutinizing every detail, long term panel approval acorss the entire lending industry, on the line for the appraiser with every single order fielded through such official proper channels. If the lender is utilizing an appraisal management company, the experiment would also be flawed, because the amc companies steal half the appraisers fee if far more, and place appraisers under unbearable performance terms which most appraisers whom keep up with those amc terms, outsource the majority of the appraisal write up and development duties to non appraisers anyways. Most of the appraisers whom complete lending work in a legitimate manner, are not out there just accepting work order requests from whomever finds their website or rings them for a single. Most appraisers whom focus in lending work don’t even have websites and long since stopped answering the phones due to an excess abuse from appraisal management companies. Half of the licensed appraisers in this country have not ever submitted a single completed appraisal in UAD compliant XML format to the FNMA CU system. Mystery shopper outside of the lending community participating in this experiment? That’s a 100% fail rate for controlled testing peramiters. Total failure to follow even a basic outline of the scientific method. I’ll be your huckleberry and wake up every day wishing someone would.

    Let’s run a reverse mystery experiment. We’ll call politicians pretending to be wealthy donors and see what kind of outlandish things they will agree to on a daily basis. Or one could just tune into fake news media to get a good feel for those topic matters. Every single day of the week; I wake up, there is a new psy-op. This article was fun, and not much to disagree with. Thanks.

    • Avatar Mark Davis says:

      All true. Unfortunately, 99% of the population is clueless about real history, especially the history of fiat money. I use to think that it was an educational problem and when the word got out better, then people would rise up and demand better, but that was a hopeful youth.

      “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Henry Ford

  6. Avatar Jaydee says:

    In this day and age, it matters not if you’re not bias and have a heart of gold. IF A PERSON OF COLOR ACCUSES YOU OF RACISM. YOU’RE A RACIST, and ALL WHITE APPRAISERS INSTANTLY BECOME RACISTS. Can anyone “PROVE” racial discrimination by “ONE (1) appraisal? Is an accused appraiser going to have to turn over all her/his work in hopes of “proving” they did nothing wrong? What happened to our rule of law? ” Innocent UNTIL proven guilty. When it comes to racial discrimination: You’re guilty and you must prove your innocence. But one cannot “prove” racism. How can anyone tell what is in the heart of another? This is ONLY reserved for GOD by GOD (and it this offends you): you’re welcome.

  7. Avatar Maria says:

    The NCRC report is nothing else than a biased article. It is not based on science, so has no credibility. It doesn’t meet the threshold of a research paper, why anyone is considering it at all? That is the problem.

    • Baggins Baggins says:

      Maria, because of this singular moment in time. Congressional hearings. The question posed; Is there a problem with racism in the appraisal industry/ The photo which will live in infamy, Mr Perry raised his hand and nobody else did. What followed was a relentless stream of 501c company activism to steak out a broad range of profitable business endeavors and special favor hand outs, which would not otherwise be possible if the traditional appraisal model remained in place. One by one as the industry players realized the appraisers are racist model could be wildly profitable for them as well, they all started raising their hands too. Enter; parea, pave, pdc’s, equitable valuations, appraisal modernization, the previously doa tech such as digital scanning of peoples interior home spaces (hide your gun, and your pipe!), supposed validation of non licensed peoples participation in the valuation process, from the top down approval FNMA, mandatory edicts such as universal non negotiable methodology such as ANSI, bifuricated validation, avm certifications, and now even redefining disinterested parties to further funnel more support towards the amc industry. You know, because all of that is good for consumers and definitely does not crush the appraisers or totally redefine valuation process and theory.

      What we got here…… is a case of Appraisal Independence! Modernization!
      I just bounced to the time stamp as indicated in that photo, just for kicks. Holy smokes that did not age very well, lol. I can’t sit through that again and there is no reason to anyways.

      So sick of the apologists. Sorry this, sorry that, forgive me lord, oh just knock it off. Nobody here has to apologize for anything. It is now your personal responsibility to subsidize literally everything for everyone all the time. Equity! They could have just gone with community redevelopment projects which have track records of revitalizing entire communities for minimal cost, but where is the big money and corporate power gain?

      When plunder becomes a way of life for groups of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it, and a moral code that glorifies it.

  8. Baggins Baggins says:

    Mr Mark Davis. You just blew my mind with that essay. Wow, great job. What strikes me is the similarity of those positions with other semi recent and historically sourced writing which claimed similar points of view. Echo’s from the past I suppose, still very valid today. Real world contemporaneous examples of if we do not know our history, condemned to repeat. Your twitter link no longer works on that site, fyi. Even if you don’t have an active twitter account, one can still read chronologically via Nitter, at least for now. Bookmarked and will look forward to reading more, possibly linking down the line.

    How could it all go so far south? War time economics in conjunction with the fiat system. For most I’d presume they’ve never read this site, but for you, never know… I was introduced to these guys on 1360 am khnc out of Johnstown CO many years ago, as that remains as an open ended anything goes truly independent station, a rare find these days. The station has changed owners a few decades later and these NORM guys are no longer on, but I recall distinctly being fascinated by an honest account of financial systems without any deception, calling things truthfully without bias. National Organization for Raw Materials. What a concept. It’s been so long I”m not even sure the links below are the best, just picked them to give you something in return. Certainly you’ll see the similarities though. What matters most is the concept of honest money systems and production, as that message continues to resonate through time.

    I’m having a Bastiat moment here on the definition of plunder and honest dealings, lol. If you find anon accounts elsewhere online harping about a return to Article I Section X, that very well could be me. ‘All of our modern societal problems can be solved by simply adhering to Article I Section X.’ No more expost facto, no more breaking the obligations of contracts, no more writ of attainders, no more fiat currency, etc, etc. The old station used to play a verbal reading of that instead of commercials, and we’d hear this a hundred times a day. They were like; If there is one singular thing which can save this country, it is for more people to understand these basic concepts of fair dealings. To the heart of the matter, even centuries ago the founding fathers clearly understood how monied interests and powerful people got ahead of citizenry. Have you seen the documentary movie; All wars are bankers wars? Suggested, one hour, find it on rumble and share.

    Forgive me for losing track of the many persons whom posted here in the past but I don’t recall being taken aback by someone posting such similar positions before. Stick around, this site is independently managed and does not answer to content controls. I’m the resident troll, free speech being so broadly restricted elsewhere and such, lol. Called what’s happening now two decades ago; If you need a log on to have speech, you have already relinquished your free speech. We don’t need anyones permission and thankfully there are other content creators and site managers out there whom feel the same way. Some things are looking up and turning around, while others appear to continue the free fall slide down the cliff. Although captured in their systems, many of us have come out of them spiritually and philosophically; come out of her my people, come out of Babylon.

    As far as this appraisers are racist trife, well, that figures. Same old tricks, different day. The people keep falling for this nonsense constantly repackaged for the next power struggle. What is most disconcerting to me is how advanced and sophisticated these mechanisms of digital control have become. That people can literally have views and notions of acceptable ethic implanted into their minds, and those directives can be freely exchanged with the next exposure to digital media. Even if the new updated view is dichotomous to their previous positions, they continue to blindly accept the programming. My latest quip on that is; Perhaps relay that same message in a different digital medium, and possibly one could be successful at reverse reverse programming the masses. Or something like that. The medium of communication is indeed just as powerful as the content itself. How sophisticated these systems have become. Who knew summary thought reconditioning was as easy as getting the entire world to watch more television for the past few years. Truly remarkable. Don’t forget that appraisers are racist, lenders deserve to be in control to protect the people from themselves, resistance is futile, and politicians are your new gods. There is a wonderful lineup to select from these days. Rinse, repeat. Cheers.

    • Avatar Mark Davis says:

      Thank you for the kind words. Here is my archive: although I haven’t submitted anything in about 5 years (many started that need to be finished). My energy levels and zeal have slowed and I “plant seeds” at many sites like this one, which I like in no small part due to your postings.

      Thanks for the links, too.

      Here is a great resource dedicated to Austrian Economics:

      We are in a cultural, social, economic, and primarily spiritual collapse portion of a long-run cycle. I don’t see a clear path to changing this trend but hope that enough become enlightened to the situation such that a large enough remnant can survive and rebuild upon solid principles, once again.

      • Baggins Baggins says:

        A breath of fresh air. This sites administrator also reads Mises. There is not enough time in the day and you know, The Liberty Daily is simply more entertaining, lol. Certainly most of us are not going with the idea of a new ‘modernization’ program, where we function as an employee tied to the desk answering to every special interest group they would dole out favors to, working for peanuts without benefits.

        That’s the thing about real independence, intangible yet so materially real if one finds a way. Life is ours we live it our way. They way these special interests have treated and disparaged appraisers to have their way. Next up now that the independents are gone; similar treatment for consumers.

        One of these days I continue to hope that people will get past this we have to prove it sort of investigative phase which never ever ends. From finances to medicine to education, everything stopped in time and all regulatory institutions have become captured agencies. That’s how these special interests keep a leg up, they never admit to having made any mistakes and mire the people down in a never ending series of challenges where nobody elses point of view or factual discoveries matter except that of the corporations running things. ‘The experts’ never seem to get it right. Representative governance is all but gone, although this concept still lives in the hearts and minds of the people. We never asked for a fight, and can not tell you how any of this will end, but if a fight is what they want, they’d better believe they got one. Liberty is what we cherish above all else. Liberty lives in our hearts and our minds, they can never take that away. We are not subscribing to a new world order, new normal, technocratic elite system, or anything else of that nature.


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Appraisal Bias – A Counterpoint

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