REDFIN How Dare You!
The following Redfin article is exceptionally offensive to everyone in the real estate business and related sectors, who actually know what they are talking about, to people that are not racists, and who are offended at being falsely called racists directly or by inference.
Redfin Study: Homes in Black Neighborhoods Are Undervalued by an Average of $46,000 | Redfin Press Center
REDFIN executives ought to know better than to permit their name to be associated with such levels of reckless dishonesty, deception, and misinformation.
Hopefully, the marketplace will ‘reward’ them appropriately.
Pay attention to the statements “after adjusting” for all significant differences. Which is then refuted further in the article by their own comments. They clearly have not adjusted for all market significant claims.
Frankly, it doesn’t appear that they have adequately adjusted for any of the differences using any nationally or internationally recognized real estate appraisal approaches. Certainly, none were disclosed. No methodology was identified. No credible reconciliation of data was provided.
Buyers of real estate in ALL instances consider LOCATION to be a huge factor. The old adage about location, location, location being the three most important considerations in buying real estate still applies. Yet Redfin is largely dismissive of the influence on value of proximity to parks; & makes absolutely unfounded broad sweeping generalizations concerning funding for school districts based on race (that is ILLEGAL in California).
They then go on to admit the only city they considered crime rates for was Chicago!
Ostensibly because all the other cities lacked adequate data! Another outrageous assumption. More likely that the results from such analyses failed to support their spurious allegations and contentions.
It’s doubtful they were able to properly account for other major locational factors such as frontage to busy traffic streets, alleys, adverse commercial or industrial uses nearby, rail lines, airports, public transportation, incompatible land uses, or neighborhood reputations evidenced by excessive graffiti or ‘Detroit style’ visible abandonment.
Since Chicago is mentioned by Redfin, what percentage of value loss is attributable to proximity to any of the meat rendering plants there, or associated odors?
On the other side of the location coin are positive or beneficial locational characteristics. Do Chicago residents place a premium on overlooking the Lake or other waterways?
The reputation for responsiveness and adequacy of protection by police, fire, and other emergency services is a big concern to many people. The perceived quality of local political leadership is also an issue. The latter category has been demonstrably lacking in Chicago leadership for decades.
Contrary to demands by limited self-serving groups with their own agendas, MOST Americans (all races) WANT good police protection. Most Americans do NOT want police departments ‘defunded’.
Most Americans will NOT pay a premium to live in areas like “Chaz” or “Chop” or other areas where city leaders have abdicated their obligations to ‘protect & serve’.
Most Americans don’t pay location premiums to live in neighborhoods where needles or human feces line the streets.
Most Americans don’t want to have to explain to their kids why ‘the ladies’ (or the guys dressed like ladies) are always standing on the street corners and talking to people in all the cars that stop by.
Automated ‘valuation’ modeling and systems have long been known to be inadequate for accurate market value analysis. They fail to account for MANY value-related factors that simply cannot be quantified scientifically. What part did these play in Redfin’s incompetent and spuriously inaccurate development of incorrect conclusions?
The value of an ocean view across the street is one such characteristic. While science or pairing MAY produce a broad range of possible value contributions for such a view, the DEGREE to which the view is valued in the specific marketplace is subjective and requires local expertise and experience. In short, it requires the ‘artful’ application of valuation techniques. Whether done by a competent agent or an appraiser.
REDFIN apparently (clearly?) had an agenda to promote. That of purported systemic racism in America. They were not about to let facts to the contrary or knowledge of recognized valuation techniques interfere with their narrative.
It never ceases to amaze me that the only people that can identify purported value disparities in entire neighborhoods are people with zero appraisal qualifications, integrity, or credibility.
Value disparities that cannot pass even cursory factual analyses. The article is full of unsupported claims & contentions.
It’s one thing to identify, acknowledge & alleviate real racism in America. It’s quite another to perpetuate a lie. Society cannot correct that which was fabricated in the first place.
States with mandatory USPAP compliance regulations in place should take legal action against the author and sponsoring company for the appraisal conclusions being offered without any degree of competency.
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Very well written article, Mr Ford!!!! One of the best I have seen…..
“The article is full of unsupported claims & contentions.”
The REDFIN article is full of unsupported claims and contentions.
Mike, as always, and excellent response to the Redfin article. it’s unfortunate that so many people will believe what Redfin says.
Thank you, thank you, thank you! The first time I heard someone claim appraiser “racial bias” was back in June 2019 during the Senate Committee meeting (if you haven’t watched it, I highly recommend). Here is a link to the transcript https://www.congress.gov/event/116th-congress/house-event/LC64892/text?s=1&r=10
And the AI March 9, 2021 letter was incredibly shocking, most notably the fourth paragraph in which the AI indicates “flexibilities” in appraising to include “alternative geographic markets that feature similar overall housing stock” – here is a link to that letter https://www.appraisalinstitute.org/file.aspx?DocumentId=2747
Thank you Mr. Ford for a well written response!
The photo which will live in infamy. “How many think there is a problem with racial bias in appraisal?” (not actual quote but still same question.) Note the only people with their hands raised are representatives of the companies seeking to manage the distribution of proposed federal subsidies. It was a setup question which fell flat but somehow became the supposed basis of fact for all these ensuing appraisers are racist articles. Note how the Brookings person referred to lower housing prices as ‘a loss’ rather than a savings to buyers. Note how the representative asking the question referred to lower housing pricing as ‘having been devalued’. That’s telling, and from a lenders perspective if they are considering additional lender income potential if pricing was subsidized higher, would certainly be accurate. One has to personally experience a higher housing price in the first place, which then becomes unexpectedly lower, to experience ‘devaluation’, otherwise price movement is just predicated upon changing market conditions based on socio economic factors of market participants. (Hint; The appraiser is not a market participant.)
Hearings like that have taken on a function of promoting special funding while masquerading as discovery, it’s pretty routine in the swamp. If we want a better balanced cash system, and more equitable distribution of money in society, the first step is to audit and then abolish the fed. Without the fed, there would be far fewer subsidies which lead to imbalance. What if I told you the fed was a private company whom has counterfeited trillions of your dollars and given that to the ultra powerful most wealthy people of the world? Once you understand how the first receivers of fed money program works, you’ll then see right through these funding request illusions like the paper tigers they are. It’s just lobbying in another form, they’ll tie it to the next porkulous once the details are sorted out.
It’s like that hit piece where the lady claiming racial bias worked for a company actively trying to automate appraisers out of a job (http://appraisersblogs.com/why-is-only-one-side-of-the-racism-claim-appraisal-story-being-reported)
Always follow the money…
It’s difficult to give much credence to populace statistics which focus on home ownership rates without also correlating that data with average credit score, average income statistics, crime, etc. I have a website link for that research which is helpful, should anyone want to unpack some details.
And what exactly is wrong with lower housing pricing anyways? Houses cost an arm and a leg, we are so thankful to have gotten in before these housing price booms, otherwise we’d have been priced out and would be renters too. This like the Brookings institute is a clever push for federal subsidies which will feed corporations providing these supposedly innovative help programs, as they capture the more impoverished communities and tie them up with massive debt and higher pricing, increasing the lenders bottom lines and padding the pockets of those distributing the subsidies. Finally breaking into a new market they could not otherwise break into, by creating a federal subsidy which provides the necessary margin for profitable engagement. Because when I want to help someone out, my first goal is to land them in a higher priced home with higher monthly payments, draw out their loan term, creating situations where predatory lending interests will target them in the near future. Nothing is for free and the racial argument and housing pricing should not be directed at appraisers or realtors. Affordable housing is HUD. Income is department of labor and other agencies tasked with resource management. Crime is going to be a concern of law enforcement. Home quality is tied to local municipalities, call the code compliance department and ask why they don’t keep some areas as tidy as others. How quickly people forget what a blunder subsidized housing was only a few years back. Let’s talk about the specific areas in question and look at how predatory lending may have effected a falling home ownership ratio. Bait meet hook. Pure race baiting. You know what happens to fish whom bite the hook first right… There are so many stories, the breakdown of housing leading to and after the foreclosure crisis, as if we will just suddenly forget about the past and only focus on comparative home worth statistics today. Please with that nonsense. Nobody went to jail and that’s why predatory lending persists today. They’re at it again, brand new program and it’s going to be a cash cow backed by the taxpayer. What’s new?
“REDFIN” has been added to my list of companies NOT to accept assignments from. Why would I or any appraiser consider working for a company that thinks appraisers are racists.
Redfin is one of the many newer realty companies whom offer a flat rate buying and listing service. The agents push more volume than average per agent, with an associated larger than average staff of non licensed administrative persons. You’ll eventually deal with them or a company like them regardless of whom your clients are. Flat rate services continue to break through by creating higher net to seller and lower cost to borrower situations. They may however be surprised to find out their presumably free marketing efforts in this specific matter are counter productive when there are no appraisers to be found. We’re certainly not going to be pushing falsely inflated comparative valuation figures, but if lenders want to go well over 100% LTV and sack borrowers from the starting line with artificially inflated local housing pricing, that’s their business and is not something the appraiser can control. Sales agents won’t mind, they’ll get bigger commissions off of the unsuspecting borrowers expanded loan package too. I would be reluctant to even provide services in areas where such an artificial price increase incentive program exists, as the professional liability of what will certainly be a rising default rate will inevitably flow back towards me and/or my insurer. When things go south with overvalued housing without the income to back the commitment they’ll all turn around and blame the appraiser, predictable. There will be no cap to the volume of cumulative price increase except comparative value to unrelated neighborhoods, rampant and prolific overvaluation will trickle outward to unexpected places at an accelerating pace. The program will then run on it’s own steam regardless of performance and market effects because of the ongoing federal subsidy with no sunset clause. We are from the government and we are here to help.
Excellent article Mike! So sad that Redfin published lies.
If Redfin really believed these different locations had the same values then then their own valuation model would return the same numbers in these various neighborhoods.
Which of course is not what their valuation model actually does. That leads me to challenge both the methodology of their analyses of the data that they’re using to suppport these conclusions as well as the conclusions themselves. And that’s the most charitable interpretation of this big disconnect between what they’re preaching vs what they’re doing. A more cynical interpretation would conclude they’re being less-than-sincere about their conclusions.
Redfin, I challenge you to calibrate your valuation model to more closely conform to your theories. Then we can test those predictions with the subsequent actions of the buyers and sellers in the marketplace.