First Known Racial Bias Court Case Against Appraiser

Dave Towne

The Bellwether Test Case; First Known Racial Bias Court Case Against Appraiser.  

It may mean that this will turn out to be the bellwether test case for other similar lawsuits against appraisers…

Folks, a San Francisco, CA US District Court Judge has ruled that the bias suit against an appraiser can proceed.

This link has the story: Judge finds plausible race discrimination in Black couple’s lawsuit over lowball appraisal | Courthouse News Service

Appraiser Janette Miller with Miller and Perotti Real Estate Appraisers was hired by appraisal services company AMC Links to do the inspection in January 2020.

The Austins’ lawsuit, filed this past December, claims Miller valued their home at $995,500 — an amount their complaint calls “erroneously low” considering their home appraised for $1.4 million in 2019.

The couple’s lawsuit quotes from Miller’s report, which appears to attribute her lowball appraisal to declining home values in Marin City following the Great Recession and foreclosure crisis of 2007-2008.

But the Austins note Marin City experienced higher foreclosure rates than other predominately white areas, which is “directly linked to the history of redlining, segregation, discrimination, and lack of access to credit in such communities.” Though more than 10 years have passed since then and home values have rebounded completely, they say Miller insisted on using outdated market trends to disproportionately devalue Marin City homes.

This case has several components.

It began with a refinance “low appraisal”, as alleged by the property owners, who are a black couple, and the appraiser white.

A second appraisal was commissioned, this one with a value substantially higher than the first, $487,000 higher. It should be noted that the home was ‘white washed’ for the second appraisal by the owners to remove observable ‘blackness’ on the property, and they used a white stand-in to represent the owner.

Once that second report was obtained, the property owners decided to file a federal lawsuit, alleging that the first appraiser was egregiously racially biased. The basis of this suit was challenged by the appraiser’s attorney, which was the reason for the ruling by the US District Court Judge – to allow the suit to proceed to trial, if it goes that far. I suspect it will.

The unfortunate thing about this is the US Justice Department has also interceded with the proceeding. It may mean that this will turn out to be the bellwether test case for other similar lawsuits against appraisers.

That’s a sad event for ‘us’ in this business. And after 29+ years in the biz, it may culminate in the appraiser quitting or relinquishing the appraiser’s license.

Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on e-AppraisersDirectory.com

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22 Responses

  1. Greg York on Facebook Greg York on Facebook says:

    I’ll be interested to see Mary Cummin’s comments on this. She has done a great job of detailing the info in this lawsuit.

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  2. Scott Taylor on Facebook Scott Taylor on Facebook says:

    I would love to review both appraisals. If the first appraiser selected comps that were the lowest possible and made adjustments to lower the value, then I get the complaint that was filed. But only honest reviews on both appraisals from unbiased third appraiser could really determine if there was racial bias. Me, I would not know how to perform a racially biased appraisal. Similar land value is key when selecting comps. Not sure which appraiser might have gone outside the subject neighborhood to get comps either higher or lower but appears one of them did.

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    • Avatar CLK says:

      Or did the second appraiser go to a different market with a higher base price? I do not know how many times listing brokers have given me “comparables” from different markets. They will usually say that the sales in the area did not support the number that they wanted. Anyone see the problem with this line of reasoning? If the market crashes and the appraisers are no longer around, who will they point the finger at?

      The more they push us out the less chance they have to use us as the scapegoat. Just give the property owners whatever they want because the taxpayers will cover it. I will retire right when the new forms come out. For the rest make sure you have good E&O, you might want to get two firms to cover you. If a property is worth 500k they will go after you for 2 million for “pain a suffering” or some other nonsense.

      The state boards are really no better. My board would not give me credit for 6 hours of continuing ed. So, I had 5 calendar days to take another class and give them the certificate. I received the email on a Friday. I took the class on-line and sent in the certificate. It has been 3 months and they have still not gotten back to me, what a joke. As we would say in the Marines “who is in charge of the cluster F*%$.)

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    • Avatar Diana N, says:

      Scott, I’m a Certified Review Appraiser for over 20 years and I have been saying the same thing since this whole brewhaha started.

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  3. Avatar Diana n says:

    We’re the appraisals reviewed by an impartial, Certified review appraiser?

    4
    • Avatar CLK says:

      Are they ever? A good appraiser can figure out the difference. I was in court once the lawyers did not know what they were doing, my report was the high one. As soon as I saw the other report, I could see that the other appraiser did not give any consideration to land values. He did not have any land sales in the cost approach, nor did he make any adjustments for the difference site size. We both used the same comparables but the one adjustment (or lack of) was the difference. The Judge sided with me.

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  4. There is NO possible way that any Appraiser can use OLD market data “trends” to somehow hold values down today. We are talking 10+ years ago and above and beyond all of that nonsense, unless the first Appraiser was using 10+ year old sales (ha ha) there is no way that this old trend would find its way into CURRENT market trends in the appraisal report. Impossible! It is all about what the buyers are paying for simlar homes in Marin City at the time of the report. Has zero to do with the Appraiser. They are confusing what the market is doing vs. what the Appraiser is reporting. From what I understand of this case, She used homes inside the same neighborhood /City as the Subject. How much better can you get than that? They Refuse to make public an independent review of that 2nd appraisal AND what about that appraisal in 2019? I would love to see if that one was INFLATED. Everyone is just assuming that the appraisal in 2019 was correct along with the 2nd higher appraisal in 2020. This is insanity and if she is found “guilty” for using good comps, then she should sue for defamation. Her business has already suffered greatly due to this suit. When the new form comes out or if before that time the PAVE committe and ASC decide we need to use comps outside of previously redlined or oppressed areas in order to fraudulently increase market values (which of course they will throw us under the bus for when the homes default and the lender has to buy back loans) that is when I cut the chord with all lenders. Luckily 80% of my business is Personal . There is no possible way I am leaving myself open for lawsuits. My personal business has very little chance of going down the Bias Road…I will leave it at that. I wish that Appraiser well and I sure hope the jury or judge sees the truth and that her Attorney gets good reviews of all the Appraisals involved and at the same time teaches all these people who have no clue about the appraisal process a lesson!

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  5. Avatar MEE says:

    Chances are the 2nd appraiser went outside the “neighborhood” where values are higher because of land value. And gave no adjustment for site or location. Just my opinion. This should get interesting because now the powers that be are chanting that “neighborhoods” & “location” are racist/biased because of something that happened 60-80 years ago. Cannot wait to hear how homes or land should be valued “higher” when there are no reasonable buyer’s that will pay it.

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  6. Avatar SCW says:

    Well this will be interesting…this will also be the start for appraisers to make the homeowner remove all photos of the interior, make them also remove themselves from their properties to prove we aren’t a bunch of racist appraisers. Times are getting interesting in our profession. Stay the course Appraisers and don’t allow intimidation such as being labeled a racist ruin our profession or discourage anyone from enjoying our job.

    1
  7. Avatar Seneca says:

    I did my own research on this house last year when this went public. This house sits in a pocket neighborhood that is divided from other neighborhoods by highways and hills. This pocket consist of only about 20% single family homes. The rest is Apartments, Condos, Offices and Commercial. See google maps. 20 Pacheco Dr, Marin, CA. Not one sale over $1million in this pocket. This means the appraisers had to extend miles into other neighborhoods to find sales. This makes this appraisal more subjective depending on which sales were chosen in which neighborhood to represent the subject. I would admit, this would be a difficult property to appraise. Which is why two different values. There is also questions on the owners recent improvements.

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  8. Baggins Baggins says:

    ‘was hired by appraisal services company AMC Links’
    I’ve identified one of the primary problems here.

    Also, why is everyone giving these people all this moral credit? They’ve admitted to a committing a crime themselves. It’s called criminal impersonation for monetary benefit.

    https://www.shazamlaw.com/theft-and-economic-crimes/criminal-impersonation/

    What exactly does Criminal Impersonation mean?
    According to our state law, CO Revised Stature § 18-5-113, a person commits Criminal Impersonation if he knowingly assumes a false or fictitious identity or capacity, and in such identity or capacity he does any other act with intent to unlawfully gain a benefit for himself or another or injure or defraud another. In other words, you pretended to be someone else in order to gain something, whether that something is money, goods, or some other benefit.

    The question begs answering; if there was disproportionate treatment in the valuation process, whom did it?

    A. The appraiser supposedly devaluing a black couples home.

    B. The appraiser supposedly over valuing a white couples home.

    Oooops. We’re not supposed to talk about that part!

    Appraiser A is an amc appraiser.

    Whom contracted appraiser B?

    Were the assignment conditions the same?

    3
    • Well that puts a whole new very important TWIST on this. Thank you for this! Totally agree!

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      • Baggins Baggins says:

        Thank you Mary. These repeat stories of this same activity of misrepresenting one selves identity to a licensed professional got me thinking; is that even legal? Can the story be as simple as black vs white when the white stand in has an obvious provable motivation to appeal and advocate for a higher value of the home appraisal process? That is the specific reason why they are standing in and committing a crime themselves, identity fraud for monetary gain of another.

        Every last one of these stories coming from the national syndicates fails to recognize; ‘assignment conditions’. Assignment conditions matter. These organizations are not familiar with our industries appraisal valuation rules guidelines ethical standards and concepts, which is why they make assumptions which provide the perceived validation of the story. Assignment elements matter. The scope of work matters. Any one of those can effect the valuation opinion. Furthermore wasn’t the amc and lender aware of this? How and why did the home owner get all the way to hiring and retaining a lawyer to push a federal lawsuit? Perhaps I’m confused, how many lenders are available to them in CA? Was there any ROV requests? How did the state board respond? Whom suggested they file a federal lawsuit ahead of these other available due process actions which could have brought clarity to the situation and/or rectified the problem? What actions did the amc and the lender pursue to validate or invalidate the first appraisal? Was a field review ordered? What were the results of that review? Did the lender pursue AVM value indicators, if so how many, and what were those value estimate results? Even in a judicial arbitration setting they don’t just get two appraisals, they get three. And each party gets to cast out one opinion, quite often leaving the middle range value opinion as the report left standing, the one to rely on. Was there a third appraisal?

        I self identify as an ameture legal concept researcher. But if I self identified as a licensed appraiser when I was not… Or if I self identified as a duly recognized peace officer when I was not… Or if I self identified as another home owner and dealt with licensed professionals on their behalf, without having any power of attorney, and misled them to my true identity… That’s a crime right? It’s called impersonation fraud. Two wrongs do not make a right.

        Look on the bright side, we’ve all just been given a method to drive our assessment basis down. If we want a lower value for tax purposes, that’s apparently as simple as having someone else stand in and impersonate us, they will be instructed to make the home all messy and point out all the faults. But you know, in the real world it’s not that simple. You’re more likely to get an appraiser whom does their job correctly and focuses on the home not the people. And in less complex real property markets, you can get a hundred different opinions, they’ll all be basically the same within a limited range of value result. To date, nobody has tested the other side of this theory in a simple market. If appraiser racism was so prolific, why don’t we hear about this in uniform townhome condo type markets?

        The core concept of advocacy comes into play. They’re advocating for one cause or the other. If an appraiser realtor or mortgage broker performed this action it would be some form of material fraud and be a felony, grounds for immoral behavior recognition and immediate suspension of licensing. Whomever is the ‘stand in’ for these stories should take heed, if they have any professional licensing themselves they have just violated moral turpitude provisions which are common provisions in state licensing guidelines. Those provisions are specifically there for the in between or grey area considerations. For when you can’t specifically identify a violation of code but the behavior or accusation is on it’s face, an obvious departure from traditionally accepted standards of professionalism and moral behavior. I think misrepresentation of identity meets that standard.

        Hypothetical: You get ahead of this as a home owner. You apply for a mortgage. You have a neighbor ‘stand in’. You get the value you want, no problem. Your stand in lies to the appraiser. You’re scheduled for closing. You disclose how you approached this with a stand in to your mortgage lender. Question: Is the mortgage lender obligated to still work with you? Is the mortgage lender obligated to redo the entire process because you have just admitted to engaging in impersonation fraud during the course of your new origination application? These are important legal questions which need recognized and answered. Thank you.

        2
        • Avatar Mary says:

          Again so many salient points here with which I agree! And even on that same townhome scenario if there was a difference, maybe just maybe it had nothing to do with the owner of the home and had to do with condition or quality etc. they never looked into the other reports that were higher and that flies in the face of slanted bias against the Appraiser. They need someone to blame rather than looking at the fraud they committed as you noted. Maybe you should share your thoughts with the Attorney for the Appraiser in Marin City. She needs all the help she can get. This lawsuit is insanity and defamation in my book!

          3
          • Baggins Baggins says:

            Thank you. No, I am staying two degrees away if possible. It’s why I never even take credit here, post under a pen name. Baggins, the little fellow whom shows surprising resilience to the forces of evil. One presumes that the person this is happening to is well aware of the limited news and blog sites detailing. I’m no expert, I just blog for kicks.

            Our home has excessive deferred maintenance after having ran over a decade of cost savings by simply ignoring the issues. It’s an interesting strategy, let the kids and time itself run things down then when it’s time to sell, remodel and present as shiny new. And now if we want to move, the bill is due. If anyone knows of appraisers whom are so bold as to over value my home, please let me know! That is truly mission impossible. I can’t even find a plumber to install the classic hot and cold shower controls separate, as in our state there are silly regulations these have to be combined items for water saving. I miss the old days of running the hot on super low and hardly any cold, we used to use less water with separate controls, hot water lasted much longer, and we were more environmentally conscious. Now in order to get to hot, have to turn up the flow volume every time and then the restriction flow items always fail or fail to deliver to specs. I’m ready for a mist shower if that’s what it takes. For the life of me, despite having tried for many years I can’t even find a plumber to go off guidelines for this seemingly innocuous home improvement of having 2 water control handles rather than 1. Good luck to anyone thinking they can hire an appraiser to deliver pre determined reporting results based on skin color.

            We also want solar, but not the kind they’re pandering today. We want this truly 100% recyclable metallurgy based solar instead. This has got to be one of the most interesting magazines I’ve ever ran across. It’s called low tech magazine. This guy scours over 100 year old scientific publications and brings history to life. It’s really interesting.
            https://www.lowtechmagazine.com/2021/10/how-to-build-a-low-tech-solar-panel.html

            Bodies of rich information like that are available at our fingertips. As the bureaucrats continue to waste time and money in an effort to find someone else to blame for all the problems their government predecessors caused. The best way to stay insulated from government, is to stay insulated from government. I hope they waste a lot of money on this appraisers are racist thing, because the longer ‘the investigation’ takes, that’s money they won’t be using to expand government further. Until they do, which is also an inevitable conclusion. The appraiser may be eventually vindicated, but not before the event is used to expand the size of government with new and counter productive institutions and for profit programs from governments private industry partners. It’s predictable, that’s how these things work. Create a new institution to manage the problem the last institution created. Never shut down or allow sun setting of the existing institutions. Never take responsibility and never admit defeat. If anyone wants to talk bias, let’s talk about the preconceived notion that appraisers must be racist, as the only explanation here. Now that’s obvious bias! The appraisers professional standing has been rendered equivalent to click bait. The appraisers should sue whomever ran these stories for defamation, agreed. Absent financial consequences for the slander, the story will continue on under a never ending series of minutely different iterations. What is this, the 5th or 6th iteration already? Give me a break.

            2
            • Mike Ford Mike Ford says:

              In one case that cannot be further identified there absolutely is an intent to sue the accusers AND the media that falsely reported known incorrect information as true, resulting in death threats to the appraiser(s) involved.

              1
        • Mike Ford Mike Ford says:

          Baggs! Paragraphs my man.

          0
          • Baggins Baggins says:

            I have become the king of run on sentences and grammatically incorrect use of paragraph spacing. A consequence of typing too fast. Old mechanic hands smoking these buttons, with an actual cigarette and cup of coffee on the side. Picture me with the cig in mouth, eyes squinting, and utilizing a keyboard with robotic accuracy like some sci fi novel. If you happen to hear of me yelling at computer screens when nobody is around, that’ means I’m blogging.

            Mike, I do hope they get somewhere with libel or false accusation, whatever they are doing. People need to learn they can’t make all sorts of false accusations about total strangers without consequences. Journalism is supposed to be a check to power, not a boot stomp to the face of innocent people.

            Thank you.

            1
  9. Mike Ford Mike Ford says:

    1. WHO says it was a lowball appraisal? Based on what credible data? The second appraisal (& whether or not it was truly independent), or commission based on perceptions of a favorable result has never been established. Maybe the second appraisal was unsupportably high.

    2. At the time of the first appraisal there was unpermitted work in progress. Specifically unpermitted additions were being made in a downslope, subterranean area that under ANSI would not today even be considered a living area.

    3. When the couple was interviewed in a televised news article the repairs/ renovations appeared to have been completed.

    4. Without either appraiser being deficient, it is absolutely possible that an ‘as is’ (FNMA requires ‘as is’) appraisal result for 1500sf to 2000 of using local comparable sales was proper. It is also possible that a subsequent appraisal employing a hypothetical condition of completion could have considered the living area to be double (or at least significantly larger) to the extent that no immediate area sales were available in that size range and broadened market area consideration to the adjacent higher-priced area could have been warranted. Its also possible that the second appraiser (pre-ANSI mandatory adoption) may have included an unpermitted subterranean area or its possible after-the-fact permits may have been obtained after the first appraisal. There are so many reasons the values could have differed with neither appraiser doing anything wrong.

    5. Then there is always the possibility that either one or both appraisers were simply wrong in their opinions. No evidence has been presented to suggest this.

    Mary Cummings, a Los Angeles-based appraiser has researched this and most of the other cases in which appraiser bias has been alleged. I have done the same to the extent feasible (based on Mary’s initial research).

    6. This (and each of the other cases) are tied to another issue which is being conflated with falsely alleged ‘low values’. That is the issue whereby certain activism groups are pushing for reparations for conditions that existed after slavery yet before the Civil Rights Act or Fair Housing Act (1964 & 1968) respectively.

    The current contention is that systemic racism (in all aspects of American life) caused ‘devaluation’ in Black neighborhoods that did not happen anywhere else in America.

    100% ignored is the impact of decades of Affirmative Action or communities that went far out of their way to create and preserve diverse (mixed race) communities. The Leadership Homes area of Carson CA is one such example.

    Also ignored is the impact of a crime arising from disproportionate numbers of crimes by black (nonfatal and fatal crimes) relative to their population representation. (U.S. Dept. of Justice https://bjs.ojp.gov/content/pub/pdf/revcoa18.pdf

    The truth is that people (of all races) choose to live where it is safer and typically pay a premium for living in such areas… regardless of races found there). Also, WHY do all the referenced ‘studies’ supporting racism claims ignore the Asian community? They compare Latino & White & Black areas. Apparently Asians never buy, sell or refinance real estate.

    Pandering by the United States President, and now PC pandering by authors of currently pending proposed draft legislation (Latinx advocates) demonstrate the issue is not really about appraisers’ bias. For the record, my part Mexican daughter is not Latinx. She is biracially & culturally a Latina… or white-whichever SHE prefers (angle-European and mestizo (Spanish-Indian-Mexican-weighted to the Mexican Indigenous side more than White Spanish)). Chicana is also acceptable. LatinX is not.

    Even Marc Morial of the Urban League was careful (& honest) enough to stress the belief is not that appraisers are biased, but rather the methods used to reflect some forms of systemic bias.

    HUD is charged with enforcing the Fair Housing Act. Yet it was their very own FHA in 1934 that promoted segregation and racism in housing valuation. I question whether the parent organization of the federal agency that published and promoted racist guidelines is the best investigator. It’s odd they never brought out their own contribution to the official systemic racism that President Biden confessed to on America’s behalf. Without the concurrence of America itself.

    Couple the pandering with outfits like Black Knight wanting to sell THEIR garbage AVM services as an alternative to human appraisers, and the interesting fact that one of the first racial bias complainants was Black Knight’s very own Corporate Counsel… and the recently announced news that Black Knight is current entertaining buy out offers & we find that not all is as it appears.

    Add in self-interest advocacy groups whose funding and existence are tied to finding causes to fight, or an author known as an activist author (Julian Glover) that cannot easily be reached to rebut his findings, and racist books by Dr. Perry (Brookings Inst.) and it is no surprise that America has lost all trust in the appraisal profession today.

    That is even before the dissatisfaction many logically feel after losing a deal because the appraised value wasn’t inflated.

    The judge obviously had their (gender-neutral) own legal reasons for allowing this case to go forward. I can only hope it was the objective pursuit of truth & actual law as opposed to interpretive ‘social equity activism law’ that prompted the decision.

    I hope appraisers will reach out to the law firm handling the accused’s case as professional experts and cite legitimate appraisal theory, principles, laws, and guidelines that relate to the known aspects of this case.

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  10. Baggins Baggins says:

    Just about everyone here is doing a better job at journalism than these hacks pushing fake appraisers are racist narratives. “I question whether the parent organization of the federal agency that published and promoted racist guidelines is the best investigator.” Indeed. That’s called a conflict of interest. Another professional post by Mr Ford. Thank you.

    This is the best response piece to date that I have read:
    https://appraisersblogs.com/refuting-the-negative-race-bated-accusations
    Ten thumbs up for American Enterprise Institute on this excellent presentation.

    1

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First Known Racial Bias Court Case Against Appraiser

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