Diatribes Against Appraisers

Dave Towne
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Hit Pieces & Diatribes Against Appraisers Based on Census Tracts. 

What’s even more frustrating to me is none of the well-known appraiser organizations have offered any public rebuttal to any of these hit pieces, or explained how the appraisal process works as a way to defend appraisers… Census Tract data delineating RACE of the population is the only ammunition the people doing these hit pieces can use to attack appraisers.

Appraisers, this is a long article but it’s important, as it reveals how you are being discredited in the work you do. Yet, ‘we’ must begin doing some introspection of what we are or have been doing, and make necessary changes. Read all the way to the end.

Every time one of these diatribes against appraisers hits the fan, i.e., is in the media, the angrier I get. That’s not good for my, or others, psychological and emotional well-being!

And the problem is I keep asking myself “are ‘we’ as professional licensed appraisers really as bad as these diatribes show?” I certainly hope not. But as other incidences in society show, minority caused activity always adversely impacts the majority, and influences policy decisions.

What’s even more frustrating to me is none of the well-known appraiser organizations have offered any public rebuttal to any of these hit pieces, or explained how the appraisal process works as a way to defend appraisers. The only folks who have done so are the good people at the American Enterprise Institute, specifically Edward Pinto and Tobias Peter, who have blown holes in all the bovine substance being passed off as ‘evidence’ that appraisers are intrinsically and intentionally racially biased.

Most of this so-called ‘evidence’ is based on CENSUS TRACT studies, which I will disclose below.

Here is the latest hit piece by MarketWatch titled ‘Property appraisers valued an interracial couple’s home at $310,000 when they met the Black homeowner — but gave their white partner a $350,000 valuation’.

It is mostly a regurgitation of what has been previously presented over many months. But this hit piece has an imbedded 84 page ‘study’ titled ‘Identifying Bias and Barriers, Promoting Equity: An Analysis of the USPAP Standards and Appraiser Qualifications Criteria.’ That study, released in January 2022, was commissioned by the Appraisal Subcommittee, released through the National Fair Housing Alliance.

The ‘study’ makes mention of these items which I will comment on in-line:

Disparate Treatment
Some cases alleging disparate treatment discrimination hinge on a loan denial based on an undervaluation of a prospective borrower’s home for purchase where the appraisal may have been based on racial considerations.Cases involving these claims rely on testimony that the challenged appraisal was unjustifiably undervalued and improperly done.

One court identified the elements of a prima facie case of appraisal discrimination involving the race of the neighborhood to include:
(1) that the home in question is in a community of color;
(2) that a loan application for the home was made;
(3) that an independent appraisal determined that the home in question was equal to the sales price;
(4) that the buyers were creditworthy; and
(5) that the loan was denied.

So, tell me why was the appraiser blamed for the loan being denied? This appraiser said the home purchase price was appropriate, and gave a valuation equal to the contract price. Where is anything about race involved? Did the court not understand the appraiser’s role for this transaction? The appraiser has nothing to do with loan underwriting or acceptance. The appraiser’s role is to provide a valuation based on market evidence. It’s up to the lender to make the lending decision.

Example: An appraisal management company allows appraisers the discretion to select the distance from the subject property from which the appraiser will select comparable homes.

You don’t say. AMCs don’t control how the appraiser selects comparable properties. If they do, then they are interfering with the appraiser independence requirements in the Dodd-Frank law.

For refinancings, several appraisers who work mainly in majority White census tracts select comparable homes within a small radius of the subject property for White homeowners, but select comparable homes in majority Black census tracts that are a greater distance from the subject property for Black homeowners. This results in lower valuations for homes owned by Black homeowners. These actions would likely violate the Fair Housing Act’s and the ECOA’s prohibition on discrimination on the basis of race.

As I have written over and over, backed up by a simple survey I did among appraisers, census tracts have little to do with how appraisers select and choose comparable properties.

Example: An appraiser works in majority White census tracts and majority Latino census tracts. For home purchase transactions, the appraiser routinely determines a valuation that is at or above the contract price for homes in majority White census tracts, but routinely determines a valuation that is below the contract price for comparable homes in majority Latino census tracts. These actions would likely violate the Fair Housing Act’s and the ECOA’s prohibition on discrimination on the basis of national origin.

…only ammunition the people doing these hit pieces can use to attack appraisers. Are you beginning to see a pattern here? Census Tract data delineating RACE of the population is the only ammunition the people doing these hit pieces can use to attack appraisers. This is precisely what the appraiser organizations are NOT telling the public. They are not telling the public that appraisers do not use Census Tract racial components to select comparables.

Example: A lender conducts a study of the appraisals from a certain appraisal management company with whom it regularly does business. After controlling for all of the home and neighborhood characteristics that the company uses to determine value, the lender finds that there is still an unexplained, statistically significant disparity between the home values in majority White census tracts and those in majority Black or Latino census tracts. These results provide evidence of a likely violation of the Fair Housing Act’s and the ECOA’s prohibition on discrimination on the basis of race and national origin.

Because no one in the greater appraiser community is challenging any of this race baiting relating to Census Tracts, it has continued for several years, unabated. Appraisers have become the alleged and attacked villains in the real property valuation process.

The other nonsense about this is public Census Tract data does not identify specific addresses of homes within the Tract by the race of the people living there. Yet, that’s the kind of inaccuracy being promoted to discredit appraisers.

Another ‘study’ in the article done by the National Community Reinvestment Coalition incorporated what I consider multiple FALSE ‘mystery shopper’ appraisals. Although to be honest, I don’t know who the alleged intended user was or the alleged intended use as shown on the appraisal order. But these appraisals on the same homes owned by interracial people, using different appraisers, on separate days, were ordered by the NCRC as a ‘test’ to see if blackwashing or whitewashing made a value difference.

I have embedded the PDF of this NCRC study below.

This is how they describe the appraisal process, on pages 9 and 10 of their study, in only ONE metro city area – Baltimore, MD:

“NCRC devised a methodology to test racial bias among appraisers by monitoring whether Black and White partners were treated differently by appraisers when showing the same homes.”

“In order to conduct the testing, NCRC recruited four interracial couples who own homes in the Baltimore metropolitan area. Fourteen different appraisals were conducted as part of seven tests. Each test was centered around a home that is owned by one of the couples who participated in the study. In each test, two appraisal companies were hired at random to conduct full appraisals of the home in question.”

“A full appraisal involves the appraiser coming to the property in person and examining both the exterior and interior of the home. It was essential to the testing that the appraisers conducted full appraisals (rather than exterior-only appraisals, often referred to as “drive-by appraisals”) so the appraiser would meet a homeowner face to face and observe the homeowner’s race.”

“…the appraisals were scheduled on separate days, as close together in time as possible. When one appraiser arrived to conduct the home inspection, they were greeted only by the White homeowner, who was the only family member present. The home had been “whitewashed,” meaning that all family photos were taken down before the appraiser arrived, as well as any cultural items that might be associated with African-Americans (such as African art, or movie posters with Black actors on them). The appraiser was given no reason to think that any Black people lived in the home. When the other appraiser arrived to conduct the home inspection, they were greeted only by the Black homeowner. The home had been “blackwashed,” meaning that the same precautions were taken to ensure that there were no signs of White people living in the home. None of the testers’ family members were home when the appraisers arrived.”

My presumption is the assignments were ordered to be completed on a standard GSE 1004/70 appraisal form, which is intended to be used for MORTGAGE LENDING. The participant home owners were ‘recruited’, which means they knew full well that they were to ‘play a role’ in this charade, and in fact, that’s what they did, per info in the study.

I want to know if the randomly selected appraisers were given info that the client was a ‘lender’ and that the purpose of the assignment was for a ‘mortgage loan.’ As NCRC describes the process, neither is a true statement. Therefore, in my view, the assignment process was based on fraud. The appraisers involved were duped.

…a common theme in these hit pieces. In reading through this report, it also makes specific references to demographics of Census Tracts. Again, a common theme in these hit pieces.

However, despite the fraudulent aspect, in my view, of how this NCRC testing was done, there does appear to be a tendency of certain appraisers to stray outside their responsibilities to avoid racial stereotyping in property valuations as delineated in this study. Some appraisers appear to be influenced by skin color rather than evaluating property characteristics and neighborhood location. That’s very distressing and should be of concern to all appraisers.

Despite my concerns about all these hit pieces, my view is that any appraiser who places ‘race’ ahead of property characteristics should be ousted from, or leave, this worthy profession, the sooner the better. That behavior cannot be condoned at all.

Appraising real property must be held to higher standards. But it’s also unfair to ‘us’ that we are being criticized by others who believe we don’t do our jobs properly when we don’t take Census Tracts into consideration.
 

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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14 Responses

  1. I’ve asked for years (borrowers, agents subject/comps), if the census tract was given any consideration when buying, selling, listing, etc., and get crickets every time. Interesting enough, my local MLS (5 million + population), has NO census tract field to search, and thus without an extreme effort (individual property look up / public records), any and all neighborhood data in the report will be free of any sorting of data based on census tract info.

    Come up with your own comment “locationaly, physically, functionally, selected….. but I would suggest to seek the truth, find the truth, and notate the truth regarding known weight applied to census tract info.

    Seek the truth.

    5
    • Avatar MD appraiser says:

      Great point Bill. I just checked my local MLS and sure enough there is NO census track field to search. Area search criteria available are: map search, subdivision, county, MLS area, school district, address, zip, city or building name.

      6
      • Avatar PJTMC says:

        Oh, just wait. The knee-jerk reaction crowd, not wanting to appear “biased”, will take care of that in short order. This way the appraiser can be demonized even further when Government predetermined expectations are not met. Kind of like the tail wagging the dog.

        1
  2. Baggins Baggins says:

    ‘Whitewashed’. ‘Blackwashed’. I was not aware that the products in my house were supposed to be limited to my specific ethnic identity.

    “Under valued”… Value; The end point of relative worth derived from a persons economic capabilities and subsequent acquisitions. Sorry, under value of homes across populace is the employment, credit, and lenders department, not the home value appraisal department. What’s next, arguments how black art is undervalued comparative to white art through history? The reparations approach is never going to work, all they’ll end up with is socialism which deprives all people of unprecedented volumes of possible wealth. Flawed observational theories from the start.

    The real cost of the State is the prosperity we do not see, the jobs that don’t exist, the technologies to which we do not have access, the businesses that do not come into existence, and the bright future that is stolen from us. The State has looted us just as surely as a robber who enters our home at night and steals all that we love. Bastiat.

    6
  3. Avatar PJTMC says:

    Very good observations and supported reasoning. The sad part is (as you have pointed out), for the most part, the spinless appraisal organizations are impotent and more concerned with how they are perceived. Not even the NAR is willing to defend their appraisal members. They are all so busy running for cover for fear of being labeled racist they can’t duck for cover fast enough. Do realtors look at census tract numbers when taking a listing? None that I know of. They look at comparable, closed, arms-length sales/iistings/pendings/expired in similar market areas (preferably the immediate neighborhood) when arriving at a list price. It has been that way since the beginning of time with no racial implications. Face it, real estate has always been about location thus the NAR term “location, location, location”. The appraiser does not control the list price of properties; the realtors do in most cases. Funny how the issue here is mostly about refinances and not what the properties are being listed and sold at by the local realtors who are not in the habit of marketing a property outside what they perceive as the sale price range. Why, because there is no money in it. Not because they are racist, because that is what the market evidence shows. Realtors price properties based on what they believe it will sell for. It is so simplistic yet being made so convoluted when it comes to appraisers. For the sake of argument, does one really believe a realtor would actually list a property for $300,000. when market data will only support a $225,000.? In the appraisal business this would be called “fraud” but it is exactly what appraisers are being asked to do. Where does this misguided rationale end. What is happening to appraisers is an attempt to actually and openly influence the appraiser through intimidation, accusations and threats including actual breaking of the law. My comments should not be misconstrued as an attack on the hard-working realtors at the NAR but to bring attention to the ridiculousness of the government arguments about out-of-control white appraiser bias but nothing about listing or sales prices for a particular geographic area. In closing, I digress to the recent NAR pole showing a perceived 2% appraisal bias (undefined race or color; individuals or appraisers) and have to ask why the NAR is not stepping up to the plate based on their own statistics. Be assured if this was an attempt to dissolve the NAR there would be an all-out response in force (hmmm, I am an appraiser member, but I guess just not important enough). I rest my case.

    6
  4. Avatar PJTMC says:

    As a postscript, no one knows the circumstances of the appraisal being touted as “proof”, figures can be massaged to accommodate ones preconceived conclusions and isn’t it the appraiser that determines the parameters of a property “neighborhood”? In 37 years, I was never taught the CT is the definition of neighborhood.

    5
  5. Avatar WA State Appraiser says:

    They blamed us for the 08 crash and they’re prepping to do it again. Always need a scapegoat and what better place to find one than a group that is unorganized and has a “history” of faults? Now with the new desktop appraisals, like the exterior only appraisals, too much liability and an easy way to blame someone as your information is more limited. I reject every single request for these and have told my clients I will not be doing them.

    4
  6. Avatar Seneca says:

    So 4 out the 6 tests the black person got a higher value. I think they misread their own study.

    3
    • Baggins Baggins says:

      To the uninformed, price is the same thing as value. I wish someone would drive down my next potential home purchase price basis. Geesh.

      4
  7. Avatar Pat says:

    This brain dead article is not supported by facts or non-bias. It was written hoping to prove a hoped for answer/result-

    Don’t forget:
    There are lies
    There are damned lies
    And then there are statistics

    2
  8. Avatar Mitzi says:

    When I do an appraisal I pull all my data the night before, 1 mile used typically for Charlotte Metro and there is no identity of the owners in pulling public information on the subject. I pulled comps and never met the people to the house until next day at the appointment and on sales I never meet the new home owner just the seller. So there is no influence of race so it is all just a set up for some reporter to do another hit piece.

    4
  9. Kathy Morton Bunting Hoey on Facebook Kathy Morton Bunting Hoey on Facebook says:

    Our MLS has no census tract identifier. The AI and AF have sold us out for their own interests and push the interests of those promoting the junk reports and bifurcated reports which do not support the best interests of the consumer, lender or Appraisers. If we do not find a way to counteract the messages and build new leadership within the profession, those who do lender work will lose their livelihood. Allowing the current “Leadership” to continue to represent us will lead us nowhere but down!

    5

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Diatribes Against Appraisers

by Dave Towne time to read: 7 min
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