AI to Counter Flawed Appraiser Bias Narrative
Last week’s email from Cindy Chance, the CEO of the Appraisal Institute, marks an important and long overdue shift in the organization’s approach to addressing accusations of bias in the appraisal profession. For too long, appraisers have faced sweeping claims that their valuations are biased against certain groups, despite appraisers’ ethical standards, rigorous training, and lack of financial stake in transactions. As Chance acknowledges, the Institute should have done more to advocate for appraisers and make the public aware of their professionalism. This public acknowledgement of an obligation to counter the flawed “appraiser bias” narrative is an encouraging first step. Appraisal organizations like the Appraisal Institute should advocate for appraisers, as advocacy is a key membership benefit. Industry groups should also step up to support appraisers.
Importantly, Chance points out that claims of appraiser bias contradict what appraisers actually do. Their role is to provide impartial, data-driven opinions of value. She explains how pioneering research in psychology revealed that all humans have cognitive biases, but professionals like appraisers are trained to minimize bias through rigorous methodology. In fact, appraisers’ discipline protects homebuyers and the industry from irrational biases. Chance suggests the Institute will undertake communications grounded in facts and science to reframe the false narrative around appraiser bias. With their scientific expertise and ethical standards, appraisers have a strong basis to counter the accusations. Chance’s leadership in publicly addressing the issue and committing to advocate for appraisers represents an encouraging change of direction for the Institute.
Strong, visible defense of appraisers from influential industry groups will be key to combatting misconceptions. Chance seems committed to supporting appraisers, though this new direction may upset some established players. Upholding professional standards and countering false narratives is critical for the future of appraisers in mortgage lending. There is still work to be done, but Chance’s leadership provides reason for optimism.
I’ve heard from many appraisers, particularly residential appraisers, that the Appraisal Institute should have done better at standing up for them by making the public aware of their skills and professional discipline. I agree. Sweeping, sensationalized claims of “bias” about our profession ignore appraisers’ core skills, ethical standards and professional disciplines. The valuer is the only party to a real estate transaction without a financial interest in its outcome; moreover, the appraiser’s duty is to uphold the public trust, by providing an unbiased, impartial opinion of value based on a rigorous process that is continually refined and improved by the profession. Appraisers are heavily regulated to ensure quality standards, held to a rigorous ethical professional code of conduct, and our SRA and MAI designations reflect the profession’s highest standards. Why then has it been difficult for appraisers to respond effectively as a profession to unfair accusations of bias?
One reason is that claims of bias are antithetical to what appraisers do. (In case you’re interested, philosophers and linguists call this a “failure of presupposition,” and it is hard to address because it assumes something that is not actually the case.) As of now, the public is hearing from the media and politicians about a certain terrible kind of bias. What they need to know is that professional real estate appraisal has long been built on eliminating all kinds of irrational bias. Appraisers, ironically, have been ahead of the curve in working continuously to identify and eliminate every kind of bias from their professional analysis.
Thanks to Daniel Kahneman, who died recently at the age of 90, and his partner Amos Tversky, the scientific community has recognized for over half a century that there is a normal human tendency toward bias, which they termed “cognitive bias.” Their research showed that cognitive bias is part of the way all our brains work normally. In fact, our survival depends upon it.
These Nobel Prize winners (followed by several more in the following decades) demonstrated that our rationality is a myth and bias is the norm, and it has been a good thing for humans, evolutionarily speaking, because bias allows us to not have to think too much in cases where a quick judgment increases our odds of survival. Roughly defined as “any predictable error that inclines your judgment in a particular direction,” bias is a natural feature of the way humans think.
It’s easy to recognize some of our most common biases that reflect what is “normal.” We are naturally more averse (two times more!) to negative consequences than we are attracted to positive consequences. This is called “loss aversion,” which helps explain why we don’t like to change, even when things are going poorly. Being twice as likely to avoid downside as to pursue upside helped kept us away from poison plants and cliff edges, but it also often keeps us from pursuing the best courses of action. There are many, many such examples of normal (not good, but normal and understandable) cognitive bias, including “anchoring bias,” the tendency to rely too heavily on the first piece of information one receives, “availability heuristic,” our tendency to overestimate the importance of information we remember easily, and “confirmation bias,” the tendency to focus on information that confirms our pre-existing hypothesis.
Cognitive bias is powerful and can only be managed through the application of methodologies and procedures that require disciplined analysis of data and information (sound familiar, appraisers?). In fact, cognitive bias is why we depend on professionals trained to be unbiased specifically where our proneness to irrationality could create serious problems, such as science, finance, and economics. Appraisers’ impartial analysis protects the public from our hard-wired, everyday biases that would undermine the healthy function of the real estate industry.
Appraisers are essential to a healthy economy because there are all kinds of opportunities for cognitive bias to infect real property valuation; real estate is a context ripe for “loss aversion,” “anchoring bias,” ”availability bias,” “conformity bias” or “conflict avoidance,” to name a few. Appraisers are trained not to fall into these irrationality traps. Appraisers are continually trained to adjust their opinions of value based on data and professional discipline, precisely to avoid cognitive biases to which homeowners, loan officers, and all of us are susceptible. And in case you think machine learning and AI will save us, it is worth noting that AVMs and AI-generated results are not more rational; on the contrary, machines proliferate biases reliably, that is, unless there are educated appraisers who are regularly producing inputs to correct them.
In reality, appraisers have a great story to tell, but we have a long way to go to refocus the terribly flawed “appraiser bias” narrative onto facts and science. With facts, fairness and science all on our side, and with your help, my team and I have committed to advocacy and communications built on each member’s commitment to doing the right thing, the right way.
There’s more to say about bias. That’s why this is part 1 of a 3-part series on bias… next up… the normal biases of homeowners and loan officers, “noise” and bias, cultural bias, the GSEs, and “banned words”…
Cindy Chance, CEO of the Appraisal Institute
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4 years late to the party. Irreparable damage has been done to the profession and is forever changed by FNMA and large AMCs who have been bullying appraisers out of the profession.
Correct . About 15 years late to the party. Until the Appraisal Institute starts condemning the AMC model and starts winning some battles for residential appraisers . This will be my last year with the organization.
100% true fact right there.
Exactly
I was a practicing affiliate and did NOT renew because of the lack support from AI. About time they pulled their head out of rectal defilade!
Well it is about DAMN time but as already noted here, damage has been done! They need to be shoving this narrative down the throats of Congress (better yet they need to REQUIRE a hearing with Congress) to discuss what she has stated in her newsletter. They need to spend BIG money spreading this word far and wide and WE must share this! I intend to share this far and wide because this is the only way we help to trash the bias narrative.
If people could just get a clue that we are not the enemy, we are the ONLY gatekeepers from disaster by irrational bias that does indeed exist by every party to the transaction BUT Appraisers!
Though the Appraisal Institute has harmed appraisers in the past through misguided policies and priorities, Cindy’s ascension to leadership there represents a pivotal opportunity to transform the organization into a true advocate for residential appraisers. As the leader of an influential institution, she has the opportunity to drive positive change.
Letting go of past grudges and partnering with Cindy is likely our best chance to regain control of the narrative, bolster public trust, and protect our role as the leading real estate valuation experts. Even if it angers some of the long-standing members, winning over Cindy could be a game-changing coup against the forces seeking to make us obsolete.
While I’m willing to give her some time. I need to see her take on AMCs and the continued intrusion of the GSEs into the Valuation space. The GSE haave long overstepped its boundaries. Both the AMC/Lenders and GSEs need to be held accountable. It’s time to take the gloves on and put on brass knuckles.
Not advocating for appraisers is my main issue with the Appraisal Institute. Appraisers pay the dues. I realize the government gives them grants and money for PAREA, USPAP… They should be able to positively advocate for appraisers and the industry while working with the government.
I wrote a blog article about Cindy’s letter. It deals with the fact that the public and media are biased against appraisers. I realize bias is human nature but the articles, lawsuits, accusations have been false and defamatory. The media has been promoting the false narrative of the “old white male racist” appraiser for years now in order to get more eyes on their articles to make money off ads. Public outrage, fear aversion, bias cause people to read and believe negative articles more than positive ones. https://mary–cummins.blogspot.com/2024/04/public-media-bias-against-real-estate.html
Well done Mary! Thank you!
Too little, too late. As with everything. For years they’ve just rolled over on working appraisers. They aren’t the only ones. Everyone picks out pockets until there is no living to be made.
When anyone from these organizations mentions AI, one presumes this is simply the soft step to their already stated goals; certifying an avm product in replacement of full service human appraisers. As if real world examples of egregious shortcomings do not abound, let’s talk subjectively about philosophy instead. Another in a never ending line of government bureaucrats mentions ‘science’ and you all reset and get your hopes up. Keep dreaming.
Anybody who is on our side must be welcomed. Even by those who have never been members
This is a good thing however more likely it is driven by which way the wind is blowing. With industry blowback about their not having appraisers backs they chose at a critical period to throw appraisers under the bus by inaction. Now that there are stirrings of pushback by appraisers and appraiser law suits they are now stepping up to the plate to be in a position to say they stopped the false narrative just like a good fair weather friend would do. One can only hope this is sincere and they DO need to apologize to the appraisers for failing them. Let’s hope NAR takes the same road now that they are under scrutiny. I wrote them over a year ago telling them they were next and it fell on deaf ears just like the institute. They thought they were above the fray and did not support their PAYING appraiser members. They have taken recent steps now, after the damage was done, to try and correct their wrong but more is needed by both.groups. They are both getting it that appraisers are not alone in this current misdirected madness.
I applaud Dr. Chance’s very public and defiant stance against the bias-peddlers. Yes, it’s about time and it took an outsider to fire the first salvo. Keep in mind when the accusations first surfaced it was against the backdrop of George Floyd and the Tate-Austin and Connoly-Mott bias cases. Anyone who took a contrary position based on facts was accused of piling on. It takes time for emotions to cool down and the facts to come out. The Institute was in no position to buck the political winds at the time, especially as they had just rejoined TAF as a sponsoring member. Now, as the courts struggle to identify a single case, let alone a pattern of appraisal-bias, the emotional hyperbole has run its course. No one else is speaking out at the institutional level . . . yet.
The Appraisal Institute, it seems is engaged in the long game by “ACE”-ing it. First “Acknowledge” the problem; then “Co-opt” it by internalizing and assimilating the accusations (putting oneself in the shoes of another); then “Educate” members and the public about the facts. Let’s tip our hat to Cindy’s efforts rather shout from the rafters about shoulda, coulda woulda. (These are my opinions only and do not necessarily reflect those of the Appraisal Institute or the CEO.)
I agree with some of the sentiments made by Charles; however, no one is being chastised for their current efforts. The facts are the facts and while acknowledging the current efforts are a step in the right direction, no one will forget, anytime soon, that when needed most, no one was home at AI. The situation was allowed to fester to a fever pitch. I’m sure their ACE policy works under normal conditions but when the boat has a hole and is sinking rapidly it is pretty clear, actions are needed sooner than later. Isn’t it their job to support the appraisal industry in good times and bad? I’m sure they were not looking for a conflict and neither were the appraisers, however when the “chips were down” they didn’t make any effort to aid the industry. Appraisers have been commenting since the start of this witch hunt, “where is the Appraisal Institute”? Self-preservation does not make their behavior okay. Their “is it clear yet” attitude is certainly a disappointment to appraisers who were fully aware they (AI) threw them under the bus in their own self-interest. Inactions speak as loud as actions. It can’t be sold any other way. Yes, I’m glad to see they are now doing something proactive, but the trust has been lost and it will take continued efforts on their part to make up for the feelings of abandonment. I like to think appraisers are fairly intelligent, analytical thinkers who can sort through a quagmire of information to arrive at a reasonable conclusion. Time will tell if they can be trusted again.
Is it just me or is the public and the appraisal community constantly conflating bias with discrimination?
In my opinion, as long as USPAP requires appraisers to state that appraisal reports are performed without bias, the perception that we are a discriminating industry will not go away.
I think that USPAP language needs to be modified so that appraisers have permission to state that appraisers are human, biased individuals and that our reports are performed with a certain amount of bias. Then, and only then, can appraisers acknowledge the (obvious) existence of our biases within our reports and what efforts we have taken during the appraisal process to avoid discrimination.
To be clear, this modification wouldn’t guarantee that an appraiser will not discriminate. Bias (a thought) and discrimination (an action) are not the same thing. The modified language would only grant the appraiser the ability to tell the truth to the public (we are biased because we are human) and demonstrate what steps were taken to address our own inherent biases. The modified language could promote and maintain the public trust much more than pretending that our biases do not exist or that an appraiser can perform a valuation without bias.
Bias cannot be prevented or eliminated; it can only be acknowledged.
I understand your argument and this is interesting, perhaps you’re selecting language which is too close together in meaning. There is no room for bias, when all a valuator does is interpret and report on other peoples decisions, or some form of tangible items most likely and most probable worth in a specific market setting, solicited under specific terms. The three forms of value; value in use, value in market, value in income. This profession would have a more realistic chance of recovery if we better educated the public on what appraisers do, and do not do, rather than diving into theoretical concepts and obscure not broadly understood philosophies.
Appraisers are not biased. We form conclusions through research and rigorous value analysis methodology pertaining to real property value in specific locations, which leads us to market value opinions. Price is not the same thing as value. Market participators make their own judgments, their own decisions, in their own best interests. The appraiser merely interprets and reports on this data. We should be careful not to describe the appraiser as biased if there was no intentional departure from fair dealings and good faith principals.
That’s my personal opinion of course. Your argument is intriguing, but fails to address the real problem, that people are blaming the appraiser for the actions and results of other peoples decisions in the real world. Play that out to a real world situation first. One ponders how they could maintain credibility and trust as an objective third party, if right out the gate the person is apologizing for something they have not done yet, and have no intention of doing anyways. Know thyself and education on the principals of liberty are better philosophies to pursue.
https://ronpaulinstitute.org/the-right-to-tell-the-government-to-go-to-hell-free-speech-in-an-age-of-government-bullies-corporate-censors-and-compliant-citizens/
Awesome comment !!!!
I want to borrow a lot of your language – I completely agree that market participators make their own judgments, their own decisions, in their own best interests. I would add that, despite our best efforts, appraisers are also participants in the market. I also agree that we, as a profession, have to be very careful with the implementation of our principals. I believe that we need to acknowledge that we are human beings with biases and discuss the processes we undertake to demonstrate there are no intentional departures from fair dealings and good faith in our reports.
We cannot describe ourselves as unbiased because we are human (nor can we describe AVMs as unbiased because they are designed by humans). Regarding an acknowledgement of our inherent biases within our reports, PD mentioned on this thread, “There are those that would take such a statement out of context and exploit it to support their self-serving narrative. They would use it in a manner to try and eliminate the appraiser stumbling block”.
To that I would say, we are having this discussion precisely because that is already happening and, in my opinion, it is partly because appraisers are pretending to be something that we aren’t. We are pretending to be unbiased and getting very defensive as a profession when other market participants say otherwise. It is literally impossible for an appraiser to develop and report an appraisal without bias. Obviously, we have to state that our reports are completed without bias though because USPAP requires it. However, it is possible for an appraiser to take accountability for our biases and state in our reports something to the effect of “This appraisal report was performed by a human being with inherent biases. The following steps were taken by the appraiser during the development and reporting of this appraisal to protect and preserve the public trust from these inherent biases…”
I don’t craft language for USPAP but hopefully you can see what I am aiming for.
I too wonder how we can maintain credibility and trust as an objective third party while we continue to remain in denial about being humans with inherent biases. Respectfully, I do not agree that acknowledgement and apology are the same. Acknowledgement of inherent biases can be a testament to our profession’s accountability. An apology is what we would owe the public if we discriminated. As you and many others have mentioned, and I whole-heartedly agree, 99.9% of appraisers do not discriminate.
Everyone is an ameture philosopher these days… Sure, why not. Well, it’s like this; We are each individually accountable for our actions. This is the American idea of individual accountability, due process, justice, law and order. There can be no crime, without a victim. If there is a victim, they shall be specifically named and the crime for which anyone may deserve punishment, specifically described. Judged by our peers. Much of this is described in the Constitution, among other important documents.
But in socialist and communist structures, everyone must atone for the wrongs of others, as the list of crimes against any citizen or even crimes against the state itself always expands, regardless if there is a victim or not. At which point everything from benign language to everyday activity, even the very nature of a human themselves becomes suspect and therefore a potential offense to the will of the collective. That’s called mob rule, the opposite of a republic signifying the adherence to individual rights. All wrong doers must atone or face punishment, as harsh as may be necessary, until compliance is achieved. Every book rewritten. Every contradiction to the state removed. Every mind reformed. The people end up apologizing to no end, forever, as long as they live.
Be careful what you wish for. This is why myself and roughly half of this country refuse to entertain the argument that somehow we must apologize or admit to our own, or anyone elses human weakness. We seek to be better, to promote strength, not weakness. In defense of liberty full time, night and day. People need to grow up and stop acting so thin skinned. They don’t know what real struggle is, but if they continue on this path, they will learn. An important legal and social concept comes into play; If we need help from the state, we have failed in our duties to be good citizens among each other, respecting all of our god given rights. Rights are not prescribed by the state, they are granted by the creator.
If there is a victim whom claims I harmed them; bring the witness forth so I can face my accuser. Otherwise I’m not apologizing to anyone. And if I ever did apologize, it would be to apologize for the other persons lack of education on the matter which led us to the point of false accusations, being dragged through the mud and other apparatuses of the state. Our constitutional structure is not all that complicated. We live in a voluntary society and if anyone is not happy with anyone elses’ services, they are free to deal with someone else instead. All service is final. There are no refunds.
There are those that would take such a statement out of context and exploit it to support their self-serving narrative. They would use it in a manner to try and eliminate the appraiser stumbling block. The people trying to eliminate appraisers are greed driven, despicable individuals who have no moral compass. It is business and they will use anything at their disposal. I may sound cynical however the “proof is in the pudding”.
‘The appraiser stumbling block.’ The appraisers new defacto descriptive of job duties; Interpreters of other peoples bias in real estate markets. lol. Sometimes my job is difficult but if the people lining up these deals have done their research and been honest, my job is usually pretty simple.
The appraiser in the big picture of lending is supposed to be inconsequential, one of many redundant checks to balances, safeguards to larger more complex systems than mere simple market value analysis. The absence of these sorts of checks and balances, that’s when real problems happen. Redundancy has a cost, and a hidden benefit which is far greater than just ‘cost savings’. Incorporating bias into this process would be better illustrated by turning to technology such as AI systems and automation rather than retaining the thoughtful logical capability of full service human appraisers. Humans dealing with other humans; what a concept. Is it me or has every single effort related to ‘appraisal modernization’ actually brought more bias into the process than it has sought to eliminate?
I tell the people it’s a tough market out there don’t trust someone just because they have a fancy title or a gold watch. Do not care about anyone elses feelings, make the best decision for yourself and you alone. A home purchase contract is a commitment, and once you sign on the dotted line, you own those terms for the length of the contract. So take it slow, always get second opinions, and be careful who you trust. People whom want to trust AI systems to make these decisions, they should check in at a mental institution at their first possible convenience.
The scandal isn’t that a few appraisers might be racially biased. The scandal is that appraisal is so squeezy that two appraisers can produce value opinions that differ by hundreds of thousands of dollars! 30+ years ago, the AIREA and SREA merged; FIRREA was passed; the structure of appraisal licensing and regulation by the states was implemented, all overseen by the Appraisal Foundation. USPAP came into being and started its annual update cycles. Continuing education was required. Then in the early 2000s, we had the boom, and then the 2007 sub-prime bust. Appraisers didn’t cause it, but they didn’t prevent it, as if they ever could have. Then the Home Valuation Code of Conduct. Despite captive AMCs being identified as a source of pressured valuations, Andrew Cuomo decided that the cure was universal use of AMCs. More bank regulation, more review and quality control. And still, for these allegedly biased appraisals, you have 2 appraisals on each property that diverge widely. In all sciences, there’s room for analytical judgment and disagreement, but analysts using similar proven methods should produce similar results. Not in appraisal! Does anyone else think there’s something wrong with our methods, theory, and practices, that results can differ so much?
https://appraisersblogs.com/loandepot-appraisal-discrimination-settlement/
Read the appraisals yourself, they are posted in that thread. If one could even call some of the hybrid simplified products as ‘appraisals.’ They did not adjust for land, gross sizing comparison differences, failed to adjust for rear features, did not adjust basement room counts, quality of feature differences, a myriad of shortcomings, see addenda, prewritten, etc, etc. The quality of the product has clearly disintegrated under the amc fast and cheap model. Utilizing the CU database for quality scoring instead of good old fashioned full reviews by actual licensed appraisers is another significant shortcoming which led to reduced reliability, along with exponential quota and volume of processing increase requirements for underwriters. There is no oversight, only the illusion of; aka administrative review. What’s so surprising about ten different engagement methods from ten different clients with ten different forms, yielding ten different results? There used to be a more uniform engagement of appraisers under the full fee full service model. Remember to keep up the party narrative; This is all the fault of the appraisers, and not that of the lenders and amc’s whom engage them, having already driven out over a hundred thousand of the most experienced appraisers right out of the industry. Pressuring appraisers works. And works very well.
Missing from this equation is the banking industry and unscrupulous mortgage industry participants who put pressure on appraisers. If anyone thinks this isn’t going on anymore is living in a perfect world and the world is far from perfect. A vast majority of appraisers are honest, hardworking individuals. Focusing on the few outliers discredits the industry as a whole. As appraisers we need to approach this as the glass is 1/2 full not 1/2 empty and start speaking positively about what’s good about the industry. Beating the drum of those hell bent on destroying us will only result in them destroying us.