Baltimore Racial Bias Lawsuit
Folks, below is the Baltimore court paperwork for the latest appraiser bias suit that recently ‘hit the fan.’
This document is fairly specific, in that it reveals quite a lot about the two appraisals performed, including the home locations for the ‘comps’ used.
The attorneys representing the plaintiffs are from the same Washington, D.C. firm that The Appraisal Foundation hired to examine USPAP. That firm was the one which has provided new ‘discrimination avoidance’ verbiage being considered in the USPAP Third Exposure Draft.
When reading over the Baltimore document, it appears painfully clear (to me) that there is a competency issue exposed. You should read it yourself to see what you believe was the ‘real’ issue with the original valuation, and perhaps with the second valuation.
But I will say that the attorneys have done a wondrous job trying to prove ‘racial discrimination’ with no direct evidence other than a low valuation, partly by saying the appraiser ‘did not nicely engage the plaintiffs’ on the original inspection day. But we have to remember that the plaintiff’s attorney job is to throw as much “stuff” against the wall as possible, hoping that some will stick.
The complaint erroneously concludes that asking about HOA dues is racist. That’s just a data point that needs to be verified and reported in the appraisal.
Another item is the attorney is trying to make the argument that buying and installing a $5,000 tankless water heater will ‘raise the value’ of the home by that amount.
And, just like Freddie Mac did with their ‘white paper’ blaming appraisers, specific Census Tract race data is included in this complaint to try to demonstrate discrimination based on that, when in reality very few appraisers pay any attention to racial components of Census Tracts, let alone even know where the Tract boundaries are.
The bottom line of this and the Marin County, CA case is the situation involving appraisers is serious. The Marin case has NOT been totally dismissed, yet.
Appraisers must do everything they can to become better PROPERTY and DATA analysts and keep any internal attitudes about neighborhood population out of the job we do.
Dave Towne on e-AppraisersDirectory.com
- New UAD Overhaul: What Appraisers Can Expect in 2025 & Beyond - September 19, 2024
- Cindy Chance Terminated - September 16, 2024
- Key Part of USPAP Not Available from TAF - July 19, 2024
If these folks really want an answer they could always publish both appraisals. I’ll guarantee that appraisers will chime in on what they see (short of doing a formal review).
My problem is when borrowers immediately jump to the conclusion that the appraiser is racist because the value was low in their opinion. How about considering the fact that one of these appraisers might be incompetent. The particular AMC they dealt with offers very low fees in my area. Is that the same in Baltimore? I have no idea. Some low fee appraisers do two to four assignments per day. How much analysis can you provide when you are pumping appraisals out right and left? Was this the case here? Again, I have no idea.
Considering some appraisers have turned into coach’s who have preached the AMC model for years, and pushed the churn and burn of 4 to 9 appraisals a day by outsourcing, or delegating the process, I think you might be on to something Jim.
Seek the truth.
Dude Bill, for real. Systemic improper development methods promoted by tech firms, improper training direction promoted by churn and burn puppy mill appraisal firms, on display for the world to see. If you do it properly, uniquely, all by yourself with no help and no assistants, anything more than one a day is not feasible or conducive to liability protection. Oh to go back in time with nothing to lose. But then again I’d have never made it this far today with such methods. Not to long ago I reviewed a report with the appraisers EO coverage page included (apparently they missed all the legal advice from their own insurers), and the yearly was nearly $3k. Meanwhile, here I am, decades of more experience with a perfect claims and state complaint free record. No traction. The state of the valuation services industry is a total mess because our supposed dear leadership has been derelict in their duties, failure to advocate for the betterment of all in this industry and promote what matters.
https://www.reddit.com/r/appraisal/
Can someone please hop on to this reddit section and redirect the young inquiring, and often misdirected minds over to this website? Thanks.
People just don’t understand the complexities of deferred maintenance and regular cost of normal upkeep. Even in optimal states with improvements, many people do not get more than they put into the home. The home is like a savings account, you pay a lot to keep up with it, and then one day you cash out. All the while one enjoys using the new items, the other existing items and materials continue to age out and depreciate in value while their sourcing costs continue to move upward.
For those whom keep detailed cost records, they often are required to invest hundreds of thousands of dollars of the life of their loan, just to break even at a regular market value sale. Price is not the same thing as value. So no, any individual item replacement does not boost home value by the source to cost and install amount. You lose on labor, and if you don’t get equivalent or better equipment, you may lose on that specific contributory item value as well. The notion the home value credit was zero when the line work and design was present with the old system item prior to replacement, also flawed. Tag in ever changing coding and regulation which accelerates diminished market response in favor of ‘green’ and similar newer design equipment in an effort to boost corporate sales, increase real property taxation, and increased control of permitted item management and record keeping, home owners usually can’t keep up. One dares not call grandpa over to change out that old faucet or light switch anymore. Lose even more on labor charges.
Isn’t it a conflict of interest to advise the government on USPAP, while simultaneously suing appraisers over the same thing one was advising regarding? Is this where the TAF lobbyist money went? Shouldn’t TAF step in with their own by laws and try to stop this? Post this again I suppose. The broken record skips on. I can not justify the time to read another detailed but false accusation about appraiser racial bias. Call this one ahead of time, it won’t hold up.
https://appraisersblogs.com/refuting-the-negative-race-bated-accusations
AEI American Enterprise Institute, Tobias Peter report; Faulty evidence and misdiagnosed solutions.
https://appraisersblogs.com/aei-research-critique-of-freddie-mac-misleading-appraisal-gap-report
This report was also related from the same group.
I see four simple things. 1). The lawyer who wrote this crap has no clue about appraising, and I seriously laughed at many of his/her over the top fluffly comments. 2). Either the first appraiser is right, or completely incompetent based on choices of comparables, adjustments and comments made in the appraisal. 3). It is interesting the lawyer and Plaintiffs have no concern about the second appraisal and use it against the other appraisal. What if the second appraiser is incompetent and chose higher sales to get the deal done?? 4). This case plus all the negative crap even coming from our own industry helped me realize it was time for me to move on. Good luck y’all. It shouldn’t be this difficult.
Back to the basics. Simplify the appraisal problem. The higher value is always right. Problem with that is this is a position taken by advocates, and advocates alone. Can someone please explain to me what exactly is wrong or objectionable with lower housing prices? Whom is an advocate, and whom is not? What important role do non advocates play? Appraisal solution; train those whom do not understand non advocacy, on the merits of non advocacy. Don’t give up yet, or you’ll be leaving us behind. American property ownership is a fundamental cornerstone of liberty. This ‘job’ is more than just a series of 1099 assignments.
Hello Mr Baggins. Thanks for your response. I apologize for being a little forward. I think we are saying the same thing in support of the appraisal industry. But we look at things a bit differently. I am a simple kinda guy who knows numbers very well and know what I see when I appraise a home. It’s that simple. As with my prior statement, this stuff shouldn’t be that difficult. I am totally in line with Thomas Jefferson. I could say much more about the state of the real estate industry, but that is a separate blog. I appreciate your energy. As for me….I’ve earned to resign from this mess. A funny note to end. I looked at the appraisal of my home back in 1987. It was 10 pages. I suspect they were much less before that. It comes down to three things. Overreach of the appraisal industry….Govt take over….and/or both. Thanks for posting to my blog. I appreciate your passion. My blog is too long. Sorry. 🙂
Dude John, thanks. Keep posting because every voice matters. What’s unique about this blog is the management, not held under any corporate or sponsor control. This is truly a free speech haven, so long as we follow the basic forum rules. And as time passes sometimes it’s wildly entertaining. Like when someone used to the typical curated messaging ‘discovers’ this blog and takes immediate offense as if their comfy echo chamber can be formed here, which the site manager stops such behavior.
I’ve been going through old workfiles to re use paper. Agreed, it used to be so simple. We used to scan in hand drawn sketches and it was good enough. This industry has no direction and incompetent and/or co opted leadership. The primary actions which can save the market valuation services industry is two fold; Force unnecessary amc management companies to bill for their service separately and apart from the appraiser, and to reverse the destructive trends towards increased automation of the vital market valuation analysis duty.
Quality analysis takes time and effort, to also consider the human elements, something a computer software, outsourced effort, or reduced effort approach will never successfully accomplish. Art not a science. Spend an entire week to come about a single value point number. It’s difficult for people to even get their minds around what an appraiser accomplishes, the important value of a legitimate check and balance application within lending. Our industry is like an indicator or litmus test to our larger society. Sadly, we’re moving away from a checks and balances based system but it’s never too late to return to something meaningful and functional, actual accountability and mandatory responsibility of personalized attention. That’s what they say on the internet and I for one believe in the concept. Full service or bust.
I’m back on with property preservation. Looks more rewarding than appraisal, with far less personal liability.
https://www.aslpreservationsolutions.com/post/2017/03/05/a-guide-to-pricing-matrix-of-nationals
https://www.property-preservation.us/get-started/
Second link is a how to guide. Really good. Thank you. “So it’s done?” “Yes, it is done.”
Disclaimer: I’ve not done a fee appraisal in four years and do not know the Baltimore market. However I made a few general observations and this court filing has gotten under my skin:
1. LoanDepot, when I was appraising, paid well but only if you provided a 24hr turn time. It docked $$ for late uploads if I remember correctly and removal from list altogether if tardy with delivery on multiple appraisals. Appraisers who knew 24 hours was not reasonable standard did not even try to get on their panel.
2. Thinking of the 24hr turn time, I don’t think the first appraiser used a census breakdown to determine the three comparables out of the dozen they thought were the best. Appraisers rarely even glance at that number for the subject let alone pull it for your comps in an appraisal with a 24hr crunch time.
3. If the home was purchased in 2016 for fair market value with no shenanigans involved, I’d assume based on the general market across the country from 2016 to 2020 the market value should be higher than when it was purchased in 2016 as it appears they did provide at least average care and maintenance. This should have rung alarm bells to the first appraiser when they came in under that 2016 purchase. I’d at least have researched why but with 24hr crunch time do you have time to do that and then maybe drive new comps? Nope you don’t plus you have 5 or so more breathing down your neck needing to be completed.
4. This court filing is not only accusing the first appraiser of being racial biased but implies the second also…. Hence the “whitewashing”
5. LoanDepot should have sent it out for review if both the mortgage broker and the owner thought the value was wrong and the owner provided all the info. I assume their was so much business at that time that the broker didn’t need the loan and just moved on. You know appraisal reviews cost money right?
6. Appraisal values may vary especially after a six month timespan. Both may be very credible and reliable yet have different values and neither value being racially biased.
There are more… lots more points to be made and thought about in this case but unfortunately it won’t make a lick of difference anyway. Good luck to all you braving this new world! Make sure your writing an appraisal you can defend everytime and don’t accept less money than your worth.
Anna, awesome, thanks. All too many appraisers presume that since they’re submitting to mortgage lending or something ancillary like property preservation liquidation disposal or that sort of thing, that they can hide behind extra ordinary assumptions and hypotheticals. Errantly presuming the supportive order management system and persons will provide a valid safeguard to shield them from lackluster effort or inadequately researched decision making process. It’s like you said, if your signature is on the report, you own it and are on your own for defense.
Like one appraiser told me the other day it’s just fine to complete a hybrid desktop which a realty agent has performed the inspection. That there is no conflict of interest because the realty agent whom does the inspection will not be the same as gets the listing. That there is no need for detailed analysis, because as I would not personally inspect, I can just whip out a desktop in an hour flat, relying on extra ordinary and/or hypo if needed. A whole $50 per report. What a pitch and I’m still in shock and awe that a supposedly professional licensed person would promote this, but indeed they do.
That’s the problem with some outfits and a hard lesson for appraisers to learn, especially the newer appraisers. Pick your clients carefully because the clients actions expectations and scope of work create the entire working climate and effect all subsequent activity and possible risk downstream. I would not in a million years accept engagement terms which dictate 24 hour flat, nor any engagement terms which penalize against my hard earned fee based on performance standards. So appraisers working on those panels can rightfully presume ahead of time that there will be no quality review, only the interests of the originator will matter, they’re on their own. And as we may indeed postulate from examples like this, those aggressive volume based client interests actually played against the appraiser when substantive complaints did actually roll around.
There were many markets in Baltimore City with oversupply and were stable to decreasing a little while surrounding counties were going up in value during this period. The house looked dated and a house sold next door for $465k a couple months later (which had remodeling but appeared to be smaller). The subject was appraised for $472k. Just because it is defendable does not mean a judge will see it that way.