Bias. It’s Easier to Blame the Messenger
The messenger. Psychology research easily points out our tendency to dislike the bearer of bad news. It’s also intuitive.
Bad news messengers do not smile when they bring the news. Sometimes they even look guilty. We humans can be really basic. We see a correlation between the bad news, the frown, and the messenger.
Appraisers are messengers. Why is their message so despicable? So biased?
In the entire real estate transaction, everyone wants to make a deal. Brokers want to make a commission. Lenders want interest and ‘points.’ Sellers want their price. Buyers want a loan to make the deal. That’s for a sale transaction. Once in the deal — everyone wants the “value” to be the agreed price. Except the appraiser.
For a refinance, the lender wants interest and points. The agent may be on a commission. The borrower wants the money. Everyone wants the “value” to be the needed price. Except the appraiser.
No one wants to be the messenger. Yet that is the job. Be unbiased. Explain your analysis. Support your opinion. Show your work.
So why would an appraiser “come in too low?” Three possible reasons.
- Carelessness or incompetence;
- Personal bias (conscious or unconscious);
- Good ethics and competence.
How can this be? We have heard about cases, several cases, where bias is the only possible reason. We have heard about whole neighborhoods priced “too low.” And worst of all, we have heard that the whole profession is distinctly biased. The whole profession! “Mis-Appraisals” run rampant!
Where is the proof?
Easy. Just look at those who call themselves “appraisers.” Just look at those who have been licensed, and note that they are bland in color. It must be clear that if the whole profession is not proportional to the distribution of color in our population. Then. It must be clear. Bias.
And what could have caused that? We have laws. We have ethics classes. We have data to follow, not color. We have neighborhoods. We have a history. A history of: red-lining, exclusionary zoning, deed covenants, FHA Handbook identifying “undesirable population,” and predatory lending. This can’t be! It must be the messenger!
Here’s the real problem:
To solve a problem of value, someone must be able to measure things. AVMs (Automated Valuation Models) can do this! Unfortunately, they are developed and programmed by – humans. Appraisers can do this. Unfortunately, some of them are biased. (Motive, or lack of motive is another thing.)
The real problem may be somewhere else. But it is much easier and more understandable to blame the messenger. Easier.