Bias. It’s Easier to Blame the Messenger

George Dell
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Bias. It's Easier to Blame the Messenger. 

No one wants to be the messenger… Appraisers are messengers. Why is their message so despicable? So biased?

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.

George Dell

George Dell

George Dell is the owner of Valuemetrics and author of the Analogue Blog. He is a graduate of San Diego State University with extensive post-graduate work in Economics, Statistics, Mathematics, Finance, and Information Systems, Certificate level work in Environmental Management and Geographic Information Systems (GIS). George has earned the MAI, SRA, and ASA designations.

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17 Responses

  1. Kimberly Pugh DeFilippis on Facebook Kimberly Pugh DeFilippis on Facebook says:

    Appraisals don’t come in “too low”. There is no such thing. We have to stop repeating the narrative of lenders and regulators.

    • Avatar Bill Johnson says:

      Being a single number, the appraised value is not high or low, but rather gets interpreted as such when other parties apply their interests.

      Seek the truth.

  2. Avatar Realist says:

    When we used to do mortgage work, sometimes the party most mad at us was the buyer. Even though our – below sales price – value was saving them from making a poor choice, they were hyped up on getting this particular property. Go figure.

    When we used to do Relocation work, the homeowner would often pull out a recent refinance appraisal. Besides being poor reports, the appraiser’s value conclusions were usually way over the top and comp. selections were unbelievable. The owner of the largest appraisal office in our region stated that they just rubber stamped what was wanted by the lender for the refinance value because it didn’t matter and was based on the borrowers ability to pay. Really? If that is the case, why bother with the appraisal. And then the honest appraiser comes along to do a relocation appraisal and has to address the fiction created by the rubber-stamper. Just a side note; the honest appraiser usually makes a fraction of the rubber-stamper. Given the current climate, the honest appraiser probably would be accused of being racist; while the fiction writing dishonest rubber-stamper is praised as being just.

    • Avatar Bill Johnson says:

      Here’s a question for you Realist.

      Over a years time, what is the real cost ($) to the typical borrower as it relates to a purchase appraisal?

      Considering I’ve cut value 80% of the time over the past 12 months, and some 50% of those get negotiated down in price, the greater answer is nothing! In fact, by my calculations, for every dollar that is spent on an appraisal, collectively I save the average borrower $10.

      Here’s a real work example. Last week I did a VA appraisal that cost the borrower $700, however with a cut value and an adjusted sales price, I saved the borrower $30,000. For every dollar he spent on the appraisal, I saved him $42. Had one last month that saved a guy over $100,000 (that was a good thank you phone call).

      Seek the truth.

      • Avatar Realist says:


        Thanks for the comments. I never broke down the savings to the borrower to a per dollar of appraisal cost savings rate. This is a good way to help put things into perspective to the over-exuberant buyer; and demonstrate the value of a good, well done appraisal.

        And the truth will set you free (at least in the long run)

        • Avatar Bill Johnson says:

          One can seek the truth, find the truth, tell the truth, and judge others by way of their actions with such truth.

          Seek the truth.

  3. Avatar Kenneth Mullinix says:

    No Value too High!!! If you prescript to this philosophy then jail awaits you. On a Federal transaction it they catch you doing that then it is fraud. The $400-$600 you might get for that appraiser might makes the sales agent happy, the lender, and the buyer or seller but you will be the one if the loan goes bad that they come after. Be honest and only work for honest lenders, agents and loan companies! Stay out of Jail!. Ken (I have been appraising for 27 years and am still in business to there is proof in the pudding).

  4. Avatar Naughty Scotty says:

    One of the only professions where ‘Doing Your job” will get you fired.

    Not just with regards to value, but other reporting factors.

    Act ethically and report the truth, and you will get sued, fired, and reprimanded from your state board.

    Someone will always be made in the real estate transaction. Usually it’s us, the appraiser.

    • Baggins Baggins says:

      Missing the IVPI proposal yet?

      You know that one of the authors of that document reportedly had solid evidence of racketeering among lenders and amc’s. They claimed to have had their personal safety specifically targeted. That’s when the individual turned to other industry heads to create a better solution for unbiased appraisal request distribution. The IVPI proposal (appraisal clearinghouse) was a workable solution. Contrast this approach to what’s happening in the industry today with REVAA consulting against appraisers interests on every turn, and a never ending stream of predatory third fourth fifth party interests seeking to eliminate sound valuation practice and outsource everything possible for their own personal benefit and liability protection. It won’t be long now before appraisers insurance companies need bailed out and subsidized, as the appraisal valuation services industry is dwarfed by all other ancillary lending industries. And if that happens, the government will be essentially fining itself.

  5. Jamie Humphrey on Facebook Jamie Humphrey on Facebook says:

    And no one ever questions when an appraisal “comes in high”.

    • Avatar Naughty Scotty says:


      You’ve never been blessed with this email:
      “Collateral Underwriter has found these 17 comparable sales which may be more recent or comparable than the sales you’ve provided. Please itemize why you did not use each sale individually and send that to us in the next 30 minutes.”

      • Avatar Bill Johnson says:

        Relating to lenders asking for such things Naughty, unfortunately you have to spell it out for them. See my example below.

        As appraisers don’t have access to Fannie Mae’s Collateral Underwriter (CU) “A proprietary appraisal risk assessment application developed by Fannie Mae to support proactive management of appraisal quality”, I had questions regarding its intended use, and its proper application related to the independent appraiser. With these questions, I found a document (see attachment) from Fannie Mae that seems to provide some guidelines or at least address some common questions. Of particular importance (related to your request today) are question 6 and question 25 (separated out below).

        Q6. Because lenders are prohibited from providing copies or displays of reports that contain CU findings to appraisers and AMCs, can they still use Lender Agents to submit to UCDP on their behalf?

        Yes, Lender Agents who submit appraisals to UCDP on behalf of their lender clients have access to the CU findings through the Fannie Mae tab in UCDP, on the submission Summary Report (SSR), or through a direct integration with UCDP if applicable. Both lenders and Lender agents acting on lender’s behalf are prohibited from distributing the CU Print Report or the SSR, making demands of, or providing instruction to AMCs/appraisers based solely on the CU automated output, or using CU to interfere with the independent judgment of the appraiser. (See Q25 for information about how to use CU findings to interact with appraisers.)

        Q25. How should lenders use CU findings to inform conversations with appraisers?

        Fannie Mae expects lenders to use human due diligence in combination with the CU findings, and will actively follow up with lenders who ask appraisers to change their reports based on CU findings without any further due diligence by the lender. Fannie Mae encourages lenders to carefully review the appraisal report, including all commentary, before seeking clarification from the appraiser. Taking messages or alternative sales at face value and simply asking your appraiser to address them is neither effective nor efficient. After completing a thorough review, lenders should be able to have constructive dialogue with appraisers if needed to resolve specific appraisal questions or concerns. Specific information from CU may be shared with an appraisal management company (AMC) or appraiser, with appropriate context, but the legal terms and conditions for CU prohibit:

        — Using the licensed application in a manner that interferes with the independent judgment of an appraiser;
        — Providing access to CU’s web-based user interface to third parties (including AMCs and appraisers); and
        — Providing copies or displays of Fannie Mae reports that contain CU findings to AMCs and appraisers. (Note that AMCs who are registered to use UCDP as Lender Agents will see the CU risk score, flags, and messages available through UCDP.)

        In short, it looks like I’m prohibited from seeing a copy or displays of the CU findings, lenders are prohibited from making demands of, or providing instruction to appraisers based solely on the CU automated output, or using CU to interfere with the independent judgement of the appraiser, etc.

        Again, as appraisers don’t have direct access to the CU platform, perhaps I’m missing something, but it seems the intention of CU is for lender internal review purposes only, versus a platform to be shared with the appraiser, or be used as a tool to evaluate / compare adjustment differences.

        Based on the above, it would seem I can’t address your areas of concern, as to do so would be an admission of receiving / reviewing a document I’m prohibited from seeing, etc..

        Seek the truth.

        • Avatar Larry Fuller says:

          I have seen that type of email… I typically ask for what parameters and data set filter they used to develop the rebuttal conclusions and if it is similar to what is stated in the appraisal report on page XX. The request will usually go away. Most people using CU don’t know what they are looking for… I spent some time at FNMA as an analyst when CU first kicked off… I asked FNMA do they have plans on making this a subscription? Blank stares back at me were the answers..

  6. Avatar Larry Fuller says:

    We should all get ready for this wave…

    “Act ethically and report the truth, and you will get sued, fired, and reprimanded from your state board.”

    It’s an unfortunate reality as of late

  7. Avatar Pat Turner says:

    Thanks for pointing this out
    If I remember correctly doesn’t Dodd Frank refer to this same thing?

    • Avatar Bill Johnson says:

      Not sure without doing a deeper dive Pat. I should note, that my posted comments are what I consider a phase one response.

      As I consider the lender to be armed with the truth after phase one, if a second request comes, I start asking for names, appraiser qualifications of onsite personnel, license numbers etc.

      Phase three, no ones ever tried me.

      Seek the truth.

  8. Avatar Gordo says:

    We got neighborhoods that are All black, All Hispanic and some mostly higher priced white neighborhoods. If I do an appraisal in a black neighborhood and use all my comps from the black neighborhood, instead of going to the higher priced white neighborhood for comps, I am now labeled a racist. How would I explain why I did not go into the Hispanic or white neighborhoods?

    Addendum:” I did not use sales from the nearby white neighborhood because it is a higher priced neighborhood.”

    I don’t think I can make that comment. Basically the buyers are racist, not the appraiser.


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Bias. It’s Easier to Blame the Messenger

by George Dell time to read: 2 min