The Real Cause of the Home Value Gap Is the Income Gap

The Real Cause of the Home Value Gap Is the Income Gap. 

Blaming appraisers for the income gap will never solve the real underlying problem… Blaming appraisers for the income gap is as ridiculous as blaming appraisers for gun violence and gas prices.

I watched the January 24, 2023 ASC Appraisal Bias hearing. Comments were requested after the hearing. This letter is my comment.

I’ve been a real estate appraiser in Los Angeles, California for 40 years. I’ve been a licensed California Certified Residential Appraiser since licenses were first offered in 1993/1994. I’m a Latino woman who speaks English and Spanish. I appraise property in the diverse county of Los Angeles and state of California.

There is no denying that racism exists in our country. We must do all we can to stop racism, sexism, ageism and all the other isms. As an appraiser I support fair, unbiased appraisal practices and valuations. I support using the scientific method and facts in order to identify the real problem in order to solve it.

I witnessed a lot of misinformation and disinformation during the hearing. Marcia Fudge the head of HUD and some of the specifically chosen speakers made racist and other statements which are not supported by facts and evidence. While there is an income, wealth and home value gap among whites, blacks and Latinos it’s not caused by real estate appraisers. It’s caused by the income gap. That is the real problem which must be solved. Blaming appraisers for the income gap will never solve the real underlying problem.

Government research has shown that there is an income gap between whites, blacks and Latinos (AEI Housing Center Response to Perry and Rothwell, 2021). Whites make and have more money than blacks and Latinos. Men make more than women. Married couples make more than singles. The income gap is the cause of the wealth gap including the generational wealth gap. It’s the cause of the difference in value among white and black, Latino owned homes.

Research has shown that people who make more money have more money and buy more expensive homes (see link above). People buy homes they can afford in areas they can afford. People who make more money also buy more expensive cars. The difference in value of the cars is also not caused by real estate appraisers.

If the race and color of the homeowners were the cause of the differences in home valuations, why do identical white owned homes in the same areas of black, Latino owned homes have the same value as black, Latino owned homes? The value has nothing to do with race or skin color but location. Everyone knows the three main indicators of value are LOCATION, LOCATION, LOCATION. A home in a small town in Ohio with few amenities is generally worth less than a home of the same size in prime Beverly Hills, California. The value is mainly in the dirt.

Fudge and some of the others spent their time attacking and blaming “old white male” real estate appraisers for the home value gap. Appraisers report market value based on the sound economic theory of matched pairs analysis. This same theory has been used since the beginning of time to value all assets. This is set by the concepts of the free market and willing and able buyers and sellers. Fudge’s promotion of the false narrative of the “racist appraiser” will never solve the real problem which is the income gap.

I will now reply to the individual instances of misinformation by the speakers in order starting with Marcia Fudge.

I. Marcia Fudge, HUD

Marcia Fudge is one of the heads of the PAVE Task Force. American Enterprise Institute (AEI) provided research, data and information to the Task Force (AEI Comments on PAVE, March 2022) which proved the real cause of the home value gap is the income gap. Fudge knows this yet instead irresponsibly promotes the false narrative of the “racist appraiser” as the cause of the home value gap. Fudge promotes Andre Perry’s false, misleading and debunked “paper” instead of independent verifiable research and facts. Perry’s paper was based on robot valuations and not appraisers.

While Fudge states she hates and fights racism Fudge’s multiple comments against white people reflect her own racism. It appears that Fudge prefers to falsely state that the problem is (white) real estate appraisers because her department HUD oversees those issues. HUD has received extra funding for this issue even though the real cause of the problem is not within control of her department. Government funding should be provided to the Departments that can actually solve the income gap problem. This is why we must first determine and state the problem which is the income gap.

Fudge stated that property tax paying for police, fire and schools was unconstitutional. It’s inconceivable that the head of a major US government department would make this statement which is a violation of her oath. When Fudge became the head of HUD she took an oath March 2021 stating “I will support and defend the Constitution of the United States (snip), that I will bear true faith and allegiance to the same; I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.”

Fudge inferred that she wanted property tax assessment values to rise so people would pay more property tax so they could get more police, fire protection and money for local schools. She doesn’t realize that most older retired disabled people can’t afford to pay more taxes and keep their homes. They’d be forced to sell with higher taxes. Appraisers don’t even make property value assessments. Those are made by Tax Assessors.

Fudge stated that black people remove personal photos, items to increase home value. That is false. All real estate agents tell all home owners of every color to remove personal articles such as photos, collectibles from their home. It shows the home bigger and better. Buyers don’t want to see any other person reflected in the home. They want to envision themselves in a blank slate of a home. It’s not about race.

Fudge stated she started the appraisal appeal process for racial bias. Appraisal appeal, Reconsideration of Value (ROV) have ALWAYS been available to borrowers of all types. They can appeal based on any reason. A difference in appraised value and contract price is not about bias. It happens more in black, Latino areas based on the home values and not the race. Research by AEI based on government loan documents proved there is no effect of race on home value (AEI How Common is Appraiser Racial Bias). AEI presented this to the government in the meeting about the PAVE task force yet Fudge keeps denying these facts.

Fudge brought up her home value previously. She said her older home is worth less (than a white person’s home up the street) BECAUSE SHE IS BLACK. I included a valuation of her home and of the NEW, LUXURY homes up, across the street from her in a past article. It’s a private development of new luxury homes tucked away off the main street. I have no idea if the home owners are all white. I doubt Fudge does either. There is a reason why those homes are worth more. They’re new, luxury, in a new development, with a clubhouse, off the main street highway… Not all homes of the same size in the same county are worth the same. An old run down home in South Los Angeles is worth less than a new one of the same size in Beverly Hills. If Fudge doesn’t know this basic appraisal theory, she should resign because she’s clearly unqualified to run the Department of Housing and Urban Development.

II. Dr. Junia Howell

Howell prefaced her research by basically stating without any proof that appraisers are racist and appraise homes in black, Latino areas for less than areas with more white owned homes. Howell promotes the false narrative of the racist appraiser. Howell states she did research on property values in white, black and Latino areas in Texas. Howell supports this with a chart showing the difference in home values of predominantly white vs black, Latino owned homes. We’re back to the income gap. Blacks, Latinos make less money than whites. For this reason they buy less expensive homes in less expensive areas. I can only assume they promote this falsity for their personal agenda of wanting more funding to pay them for more research.

Howell doesn’t understand basic real estate cycles, i.e. Growth, Stability, Decline, Revitalization. Howell stated areas which were redlined but are now mainly white owned increased in value. Areas which were not redlined but are now mainly black, Latino have decreased in value. Howell states this proves it’s based on race when it actually proves it’s based on real estate cycles and income. When values go up in an area, people with more money buy and own those homes. When values go down, blacks, Latinos are more likely to buy and own the homes because they make less money. When people get pushed out of more expensive areas, they buy homes in lower priced surrounding areas. Those lower priced areas are generally more black, Latino. Some call this “gentrification” but it’s just a real estate cycle called “revitalization.” It’s all because of the income, wealth gap.

Howell misstates “redlining” as a “map based on race of inhabitants.” There were many, many factors involved in the original Federal Housing Administration (FHA) lending policies. They were based on income on inhabitants, age of buildings, condition of buildings, beds/baths, location… to determine loan risks. We still use all of those factors today EXCEPT race. It’s racist and against the law to use race, religions or any other similar factor.

Howell stated that whites in the US government used these risk maps to intentionally value white owned property higher than black, POC owned property. Howell is so uneducated in this matter that she doesn’t even realize that back in the 1930’s most areas which were mainly inhabited by POC were actually owned by whites. The risk maps prevented white property owners from receiving lower cost Federal guaranteed loans. Howell stated “White, affluent areas were appraised as most valuable.” The key here is “affluent areas.” It’s the income wealth gap. Correlation does not equal causation.

There are poor white areas in the US. How does Howell explain the difference in property values between wealthy and less wealthy white owned properties? She doesn’t. It’s not the color of their skin but the income gap. Howell made many more false and uneducated statements before stating that more research should be done. Howell wants more money to do more uneducated flawed research to promote the false narrative of the “racist appraiser.”

III. Paul Austin and Tenisha Tate-Austin

I have covered this case in great detail because I’m an appraiser in California where the Tate’s home is located. While the Austins may feel the difference in two home appraisals was due to racial discrimination the facts show it was not. Based on my research and experience the first appraiser used the best local comparables in Marin City and came in at market value. The second higher appraisal used dissimilar comparables in a very different more affluent area in Mill Valley much farther away from the subject. That is why it came in over market value. Marin City was built on swamp land as a Federal low income poor quality housing project built by the lowest bidder. The Tate’s home was built cheaply using telephone poles on very steep previously unbuildable land. Mill Valley is an upscale community with high quality larger homes and some of the best schools and amenities in the state.

The Tates stated in their testimony and lawsuit that Marin City is basically populated by African Americans while Mill Valley is white. The Tates wanted the appraiser to only use high valued comps from Mill Valley and not lower valued comps from Marin City right next to their home. That would violate Federal appraising regulations besides being bank fraud.

The Tates believe their whitewashing of their home increased the second appraisal value. It didn’t. What increased the value was another appraiser with lower ethics who was most likely pressured by maybe the AMC, Lender to come in higher. The second appraiser is the reason why the first appraiser was falsely sued for coming in “low.” The second appraiser should be sued for bank fraud, appraisal violations and lose their license.

IV. Michael Fratantoni, Mortgage Bankers Association

Frantantoni basically promoted the MBA. Frantantoni suggested Automated Valuation Methods (AVMs) could reduce bias in appraisals. AVMs don’t reduce but increase bias. AVMs are robots that don’t actually see or inspect the home. They base their value on recently sold allegedly similar homes based on home/lot size, bed/bath count and age. They don’t know if the home actually exists, its condition, upgrades, view, lot type, specific location in a neighborhood, actual size, true bed/bath count, permitted/unpermitted additions… AVMs value average homes in poor condition over market value and improved homes with views under market value. Marcia Fudge stated she also supports AVMs. Zillow’s AVM actually produced the false and misleading data used in Andre Perry’s “paper.”

V. Craig Steinley, President, the Appraisal Institute, AI

The AI is a non-government non-profit organization. It costs about $15,000 to become an MAI AI designated appraiser. For this reason AI mainly represents wealthy older white male appraisers. It does not represent the average appraiser or most appraisers in the US.

AI wants to maintain its working relationship with the government. For that reason they support many though not all falsehoods stated by Fudge, HUD and other some government agencies. In their letter they promote their own actions as supporting the government.

That said AI makes some important points about AVMs and the Sales Comparison Approach.

AVMs are not reliable. “One thing to be noted is that a good portion of the research that has been conducted on valuation bias has evaluated automated valuation model data – not appraisal data, including the contrasting research from the Brookings Institution and the American Enterprise Institute. We cannot overlook the Zillow CEO’s statement in the 4th quarter of 2021 concerning the “difficulty of accurately estimating market value” as a concern for AVM reliability.”

Sales Comparison Approach is reliable. Some have called for the “elimination of the sales comparison approach in appraisal. The BRSPT suggests those recommendations be ignored, and we will go on record as being outright opposed to such efforts. The sales comparison approach is grounded in economic theory, and it is universally accepted throughout the world.” Some in government have suggested getting rid of the sales comparison approach which would destroy our economy. No bank would give a loan and no investor would buy a loan that is not based on an appraisal using the sales comparison approach.

In conclusion the cause of the difference in home valuations between whites and blacks, Latinos is the direct result of the income gap. The government needs to recognize and state the real problem so it can be solved. Blaming real estate appraisers will never solve the income gap or the home value gap. Blaming appraisers for the income gap is as ridiculous as blaming appraisers for gun violence and gas prices.

Please, rely on qualified independent scientific research and facts. Promoting the false narrative and attacking appraisers instead of trying to solve the real issue hurts everyone. Throwing money at HUD won’t fix the income gap. Please, fix the income gap and all its causes so we all may experience the American Dream of owning a valuable home.

Mary Cummins
Image credit flickr - Andra Mihali
Mary Cummins

Mary Cummins

Mary is a certified residential appraiser and has been in real estate since 1983. She is licensed by the California Office of Real Estate Appraisers. She was an agent and broker licensed with the California Department of Real Estate selling residential income, commercial buildings, raw land and homes for Merrill Lynch Realty in Beverly Hills and Westside Properties in Los Angeles before concentrating on appraisals.

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68 Responses

  1. Avatar Frank Wilson says:

    I believe there is a house 2 doors down from Fudge that is in a different city with higher rated schools.

    Howell also uses the term Latinx in at least some of her research papers and in her presentation. It is my understanding that by and large those described by this hate the term.

    I have seen AVMs be over 50% off in either direction. Zillow or redfin may show similar homes selling for $300k-500k and than estimate the value at $750k. If a home is given a waiver based on this then it is the luck of how the AVM is programmed, not based on the market value. Its like gambling and the taxpayers pay the price. I seem to recall zillow failing at flipping houses using their own AVM in an increasing market.

    Many of these complaints of bias are when the homeowner lives near higher priced areas across a major road. The complaint is the appraiser using comps on the same side of that major road in the same city/community/market area etc, instead of cherry picking from a higher priced area. The ‘appraiser’ who cherry picked is celebrated while the appraiser trying to do a credible appraisal is vilified. This is not good when you put the unethical or less competent on a pedestal while trying to tear down those trying to do a good job.

    • I agree with you. I’m Latino and I hate “Latinx.” Most Latinos hate it. It’s an English language neologism. It’s supposed to be gender-neutral but we already have “Latine” if one doesn’t want to use gendered “Latino” or “Latina.” The “x” and “e” were actually added by some non Latinos more recently to be in line with “they/them” pronouns when it comes to LGBTQ identities.

      As you stated many of these media accusations of racial bias involve properties in unique locations. They’re either near the edge of a lower/higher priced neighborhood, have unpermitted additions, major issues affecting condition or they’re near major busy roads with different school systems.

      When I wrote articles about a few of these homes which were the subject of major racial bias media articles I added the AVM values. An AVM can’t be racially biased because it’s a robot. Even the AVMs varied widely especially for the Marin City, California case involving the Austins who spoke at the meeting.

      The worst AVM was Zillow. After running some experiments it turns out Zillow keeps searching wider until it finds recent comps of similar size. With Marin City there were no recent comps in the same neighborhood so Zillow went up to two miles wide into Mill Valley which is a much more expensive area with luxury quality homes. Mill Valley also has very low crime, lots of added amenities and one of the best school systems in the state.

      • Avatar Frank Wilson says:

        An AVM could be biased based on the predominant skin color of nearby residents if its programmed that way (I think its secret how their algorithms work), but it can’t tell the skin color of anyone involved in the transaction. With so many AVMs competing to be used by lenders there will be a bias to value homes higher to appeal to lenders to use them (at least those that sell their loans to others).

        I wonder if AVMs have any sort of way to adjust between a higher quality home and a lower quality modular looking home held up by telephone poles. How well can an AVM tell the terrain, is it mostly level? Is it filled in swamp land?

        Just did an appraisal for around 4M that zillow estimated at 2.75M. There was plenty of good data and no comp home was selling anywhere near that 2.75M.

        I understand appraisers don’t want to lose their jobs, but really from what I have seen there is no AVM that is even remotely reliable. You can’t just program it like a chess supercomputer. Market conditions change. People value features differently based on the current market conditions. My fear is this will be a first check and only check if its above the contract price. I can understand if someone has paid 80-90% of their mortgage and there is not much variance in the area…but who tells them that there is not much variance in the area?

        • I read quite a few articles on AVM research. It’s the usual garbage in, garbage out. AVMs only use a few factors, i.e. size per tax and MLS if known, bed/bath per tax and MLS, pool per tax and MLS, lot size… It does not know condition, view, actual size, permitted additions, upgrades, lot type, slope, location near freeway/dump site/strip club or even if the home physically exists. AVMs are only accurate for average size homes in average condition on average flat lot type, i.e. basically newer tract homes. Here’s an article I wrote about the problems with AVMs.

          • Avatar Frank Wilson says:

            Great article. My fear is not that AVMs are so good that they could replace appraisers, but that there are lenders that care so little about quality that they would be fine with the garbage. This will invite more fraud and people to overleverage. This does not help provide generational wealth.

            Even if some AVMs are better than others it would depend if the lender can pick and choose. Would they choose the best or the one that puts out higher values on average.

            • Baggins Baggins says:

              Also of note is that avm utility programs are not necessarily prioritizing accurate valuations as the most important most weighted aspect of their business operational efforts. As there are many competing amc programs for lenders and realty brokerages to choose from, they also structure the programs around; more engagement, generating more leads, providing longer lasting contact capabilities. Appraisers can learn a lot of additional information regarding avm programs and functions, information not necessarily available online or in solicitations, by simply talking to realty agents about what avm their brokerages choose, as most large realty companies subscribe to one or another avm these days. Some avm’s maintain a better focus on fair market value, (which is proving to be a quite difficult task and quite difficult sell point by itself), but quite often what appears to be happening is a for profit desire which shifts the avm utilities core function to something more akin to a constant marketing campaign to generate more leads and acquire more customers in this now overly saturated space.

              For many years when zillow was the pioneer and basically the only avm of note available to the public I was always saying; Know why Zillow gets so many clicks and everyone knows about it? High numbers. Higher valuation numbers means more clicks. For these reasons any AI group attempt to certify avm’s in a meaningful way similar to a human appraiser will be a failure. Price is not the same thing as value and capturing market share as an avm company perceives ‘value’, (which is a value in use and value in income), is not the same type of value as residential fair market value. Bait meet the hook.

              • Avatar Frank Wilson says:

                Bingo, homeowners want to see higher numbers when they look up their property. People buying a home want to feel like they are getting a good deal. I’m buying this house for $500,000 but zillow says its worth $600,000!

                • Baggins Baggins says:

                  Exactly. Thank you Mr Wilson. More people need to understand that although AVM utilities started out with a goal of accurate valuations, many free of charge, that’s not how these companies landed in the end. Now the avm companies in competition to have more market share among lenders, realty agencies, title groups, appraisal management companies, the general public. When you get an avm via a lender during a refinance, they’re charging like $150 a pop. Big name realty brokerages are group subscribing, bringing in millions of dollars to some of these, if not creating avm utilities to sell to other brokerages. They choose or form the avm’s which provide better customer retention and buyer engagement. Even the cash investors are using avm’s, with a preference for those which apply discounted value analysis. To rely on an avm, is to rely on an unaccountable, non licensed entity with ingrained bias, that bias depending on how and whom you sourced the avm product through.

                  Was reading 10 years ago appraisal and regulatory content. Remember the days not so long ago when we were arguing, and states were passing laws, that avm’s, and evals, could not be substituted for full appraisals? These corrupt ‘stakeholders’ keep changing the language. We went from an eval to an avm to a hybrid, to a appraiser reconciled bpo value product. It never ends. The only rule worth having is a very low demins number (scale that back to $100k tops), and a firm requirement that the human speed bump otherwise known as a licensed appraiser MUST complete either a drive by or a full inspection appraisal for federally qualified loans. Non QE should be included and we should wipe away this ridiculous concept that somehow lender and amc regulation has various flexibilities based on the type or size of lender. Across the board static equal regulation for all is necessary to protect both the stability and liquidity of both lending and residential housing markets in this nation. There is no such thing as residential housing anymore, it’s all commercial now. The only difference is who resides and for how long because as far as investments are concerned, nothing is off limit and the entire American housing market is up for grabs. There is a bigger game afoot, the fictitious appraisers are racist narrative is being set in place at the behest of these other special interest programs and companies. They can’t fully commercialize residential housing markets as long as independent human appraisers are still required to participate.

                  ‘You will own nothing and you will be happy.’ I don’t think most appraisers realize what’s at stake and what vital role they are currently fulfilling regarding the future of this country.

              • Zillow uses their Zestimate for marketing purposes to draw people to their website to sell other services. Their purpose was not to be accurate.

  2. Avatar Bill Johnson says:

    Although I want people to seek the truth, often times even when exposed to it, they ignore it. For those keeping score at home, nationally Asians make more money than whites, and being white in California makes you a minority.

    Good article.

    Seek the truth

  3. Avatar Pat Turner says:

    God Bless You Mary.

    The best response to this insanity I have seen.

    The problem is not any of these claims are supported by facts or evidence. It is nowhere near scientific or balanced. The propagators WANT these charges to be true, but can’t produce the evidence!!

    Congratulations on a great piece of work!

  4. Avatar Caleb says:

    Finally some common sense. Thank you Mary!

  5. Kathy Morton Bunting Hoey on Facebook Kathy Morton Bunting Hoey on Facebook says:

    It also does not help when AMC’s are hiring appraisers that sit in a room pounding out bifurcated and desktop appraisals in 5 or more states in which they have no geographical competency. A good appraiser understands the nuances in the individual markets they work in. Crappy appraising results in crappy appraisals! Big money does not care and is willing to work with the least qualified and least experienced if they can get them to work for low fees.

    • Avatar Frank Wilson says:

      An AVM could be better than these people filling out garbage. I know of at least one licensed in 11 states. It is hard to get the general public to care until there is discussions of a bailout and even then those with big microphones misdirect their anger at us instead of at these bottom feeders wanting unethical people with a license.

      • Baggins Baggins says:

        Quite right Kathy and Frank, indeed. One hopeful solution remains on the table, that EO insurers should have additional fees if not an outright separate additional insurance appraisers should buy into, if the appraiser does things like; appraise in different states, provide bifurcated appraisals, rely on third party inspectors, etc, etc. The most responsible among the insured appraiser community will surely pay higher fees for all the excess risk and loss these fly by night 10 a day appraisers are generating. Radian told me half hour per and sometimes you don’t even need to adjust, as the realty agent picks the comps for you. They literally pay a person lawn mowing more than the appraiser per hourly estimate.

        Oh no, I said it. I said it again. There, I said it again. Oh no.

  6. Avatar Kenneth Mullinix says:

    I am in the middle of a “Racist” claim from a home owner who lives in Los Angeles, who sent a complaint to the VA (VA loan) then to HUD. It is a nightmare. I have been appraising 35 years with no trouble and now I am ending my career lost in complaints and lawsuits are on the way. If you want me to write about my experiences with this let me know. Ken

    • Avatar Frank Wilson says:

      That is horrible. Did VA drop you?

    • Avatar Kimberly DeFilippis says:

      I am very interested in your experiences Ken.

    • So sorry to hear this. I’m an appraiser in Los Angeles. Can I help in any way? Is your E&O provider helping you?

    • Ken, we’re so sorry to hear about your ordeal. We’re definitely interested in knowing more about your case. Let us know if there is anything we can do to help. If you’d like us to share your story, let us know.

    • Avatar Maria says:

      Ken, did your lawyer read the report? Per URAR (UAD) pg 1: “Race and racial composition of the neighborhood are not appraisal factors.” We are prohibited to use any racial data for the subject, and so it is assumed for the comps too. Are you sued, because you followed regulations? Are you sued, because you didn’t break the law? (Fair Housing Act)? This is not simply an appraiser issue.
      Please, let us know where your case is at this point. Thank you!

  7. Avatar Eric Kennedy says:

    Thank you Mary for helping to expose this fraud for what it is. Greed and Ignorance.

  8. This is purely Political of course. There has been no peer reviewed scientific evidence provided that would support claims of systemic appraisal racism. Claims made against appraisers are coming from Biased sources with an agenda.

    Elections have consequences. Unfortunately the 2020 election has resulted in policy decisions and rhetoric from the top of the apex that publicly tarnish, undermine and discredit the impartiality and ethics of all appraisers.

    Candidate Biden told us (appraisers) what he would do, if elected. After taking office he appointed Marcia Fudge as Sec of HUD to implement this policy against appraisers, on behalf of the Executive Branch.

    She’s done as told by her Boss. Just following orders.

    Besides HUD/Marcia Fudge, many others too have jumped on board this Political bandwagon, including, but not limited to, ASC, TAF, TAF President, FNMA, FHLMC, Maxine Waters (who is fortunately the former Chairman of Finance Committee) and so on. The list goes on.

    Emotions and feelings have supplanted science and facts.

    Household Income affects residential housing prices. Not race.

    Prices affect values. Not race.

    With these racial bias claims against appraisers from virtually all stake holders, the question is, why? The answer to the question is “follow the money”.

    Each stakeholder expects a financial benefit through this constant Preference Falsification narrative.

    • Baggins Baggins says:

      Speaking of preference falsification. Here is a real world example of that. A simple then vs now, appraisers were not racist, then after peer pressure is applied, it’s the current thing, appraisers are racist. Funny how tossing a little slander and false accusations into the mix among entitled freeloaders can have this effect.

      And just like that Dave Bunton alongside what is likely the rest of the AI group management redirected their travel plans from the bahamas, to instead watch appraisers are racist movies at Brookings, free milk and cookies. Joan became suddenly aware of this pervasive issue. Sprinkle a little political kickback donation from the grant money the political jukebox otherwise known as the Brookings institute enjoys, and voila; all appraisers are suddenly racist.

      These people are advocating for incredibly high taxes for American citizens, artificial prolonging of housing availability scarcity. If only someone would stop hedge fund and investment firms from having special privileges to buy 19 out of 20 available defaulted units at a special discount from GSE’s via auction ahead of regular citizens, these groups could have returned trillions of dollars of home equity and opportunity back to regular American citizens. But who would pay them for such altruistic noble goals? Who would pay them to go against interests more politically entwined than their own group? Nobody, that’s why it does not happen. You are watching political theater from special interest groups and their corrupt politicians. 10% back to the big guy, whomever that is in their respective circles. Welcome to modern government. Please remember to never talk about the Federal Reserve, how taxation is theft, ethical principals, the concept of taxation without representation, unfair advantage, the destructive nature of long since failed affirmative action programs. If you mention Article 1 Section 10, you’re off the committee. These people have a lot of money and potential income on the line, be respectful to their interests and acknowledge your now personalized problem with racism.

      Recreate this moment today… These flip floppers would be splashing all over.

  9. Avatar Chuck Minzenberger, SRA says:

    Excellent article, short and to the point. Here’s my bumper sticker on this subject, ‘blaming the appraiser is like blaming the temperature on the thermometer’

    • Baggins Baggins says:

      It’s getting bad. Over the past few weeks there has been at least 2 if not more appraisers, just blogging right here on this little website, that they have now been personally accused of being racist and had complaints filed recently. If those appraisers are reading this, please do not wait, publicize the issue for your own protection, and if possible, do it here as well as other outlets. If that happens to me I’m quitting the very next day, avoiding it for now by basically abandoning most mortgage lending pursuits. So much for being in this business with a passion for consumer protection. Brookings Institute can add decimating an eighty thousand person industry to their company resume, helpful things they’ve done for society with the billions of grant monies. Equity!

      We need a group fund and set of lawyers whom we can all go to, people up to speed on these false accusations being fueled by non accountable out of control 501c groups. I would join the AGA if there was a member benefit like that. Can we line someone up through these low price legal groups so many people turn to for affordability reasons? Obviously due to the conflict of interest the AI & TAF appraisal trade groups are presenting, our own groups are not going to help, they’re more interested in selling a new line of books on the matter, pandering to false accusations as a way to further monetize the issue. Only a rare few of the appraisal industry groups are standing against these fictitious slanderous libelous narratives, and they’re not the appropriate parties to call for personal representation. When are the appraisers errors and omissions insurers going to chime in, these are supposed to be our go to legal representatives. Perhaps it’s too late for the EO insurers, having long since had a preference falsification of their own, to simply settle and move along. Ambulance chasers have entered the chat.

      Mary you did it again, great article.

      • Avatar ej says:

        —Baggins how are you surviving? I’m thinking of dropping mortgage lender work as well. Are you mostly completing non-lender assignments?

        • Baggins Baggins says:

          It’s over for the time being. All that is left is part time. And I like it this way, a pleasant reprieve, we pulled the girls out of school due to radical policies, time management requirements have changed. Acquire that legal and independent work if you want, there is a lot of it, good luck.

  10. Avatar PJTMC says:

    Outstanding article. Honest, accurate and insightful. I would like to add, as I’ve done in the past; the complaints I have read about are from refinancing when the borrower can’t get the funds they would like with an inflated appraisal. Totally self-serving. That said, if the observation is “old white appraisers” are racist” then too “old white Realtors” are racist when performing their market analysis in neighborhoods of lower income families; Assessors are racist rendering assessments in areas of lower income individuals and, while I’m at it, let’s throw the racist valuation companies under the bus also. NAR’s own recent survey (that they obviously don’t recognize) clearly points out there is minimal appraiser bias to the point it is almost nonexistent. This in addition to other Federal Agencies also declaring the same. This is a trumped-up agenda by racist individuals using racism as a club to beat on some predisposed self-serving agenda. Last but not least, the NAR, AI, Appraisal Education Companies and the like…shame on you for getting caught up in this insane witch hunt. As they say, “man up” or is that no longer politically correct.

  11. Avatar Pat says:


    Send me your email as I have some experience that might help


  12. Avatar JohnnyQ says:

    Income gap. I’m so sick of the term to the point of nausea. It seems to imply that income should be the same across the board for everyone. Well, even among whites, or pick any race or ethnicity, income is not the same. The reasons are multifarious and the notion that it should be “equitable” among all is a pipe dream with a double chaudul.

    Great article by the way and better yet that it was submitted as a comment to the hearings. Thank you for that.

  13. Avatar CJK says:

    I vote for Mary to be the president of our newly formed national appraiser union, that will fight for the rights of all appraisers. Dang it I tried the union thing 40 years ago and was berated by some hardheads who said the AI would fight for the appraisers, look how good that turned out. It’s too late now no one can save us from this onslaught.

  14. Avatar Mark Davis says:

    Excellent article and comments. Well done and thank you for your efforts, Mary.

  15. Avatar James Anderson says:

    Be very careful what you wish for. Whenever government intercedes to right a wrong they usually make it worse. Keep in mind, the War on Poverty in 1964, or the War on Drugs in 1971. Since these wars began the problems have become exponentially worse. Currently, the government is focusing on the income gap. Has it got better or worse over the past few years? We both know the answer. Having Bill Gates and George Soros decide how the income gap should be fixed is like two wolves and a lamb deciding what is for dinner. If you don’t think the government isn’t doing these folks bidding, then I can’t help you.

    Listen to Klaus Schwab with the WEF tell you that, “You will own nothing and be happy”. Notice he doesn’t say he and his compatriots will own nothing. Just you.

    Nothing has created a better quality of life than fairly regulated free market capitalism. Right now we have crony capitalism. Will there be winners and losers? There always have been and always will be. Can minorities compete on an equal footing. Absolutely. The only thing that hurts many of them is a government that tells them that you can’t live without their help. Think I’m wrong? Look at the rate of successful black entrepreneurs in the 40’s and 50’s. Government stepped in and destroyed the black family and their incentive to be entrepreneurs.

    I imagine the War on the Income Gap will be no less successful.

    • Avatar Kimberly DeFilippis says:

      Best response yet.

    • Avatar PJTMC says:

      While she may need to be “careful” I commend her for being so proactive rather than being inactive and preaching to the quire as many of us have been doing (me included). She has obviously taken a lot of time and thought to address this in a very professional manner at a potential cost to herself. More need to follow her example and damn being “careful’. “Careful” is what has gotten us to where we are. I commend and admire her tenacity.

      • Avatar James Anderson says:

        I’m certainly not telling her to be careful in what she does or says. I respect her opinion and believe the best solution to the income gap is her example (multiplied throughout society). I’m only cautioning everyone, her included, to be careful on trying to fix something that has gone on everywhere throughout history, via government. If you don’t think there is a large income gap in the most Communist countries in the world, you’re mistaken. Being careful is certainly better than just doing something without weighing the possible unintended consequences.

        Actually, arguing the point is moot. The die has been cast. The powers that be are too strong and united. We hand over liberty to them in the name of security every day. The US was an anomaly in history. Perfect? No. But better than what preceded it. The worldwide oligarchy that has now been formed is likely too powerful for a complacent nation to defeat. Get ready, you will own nothing and be happy. Think this is conspiracy talk? Read their own words. These folks are serious and will not be deterred.

        • Baggins Baggins says:

          James you’re getting me riled up, I’m about to post an IW reference. Again, the world is what we make of it. Fight the future. Vote with your wallet, vote with your feet. We can’t opt out twice, now it’s your turn. Do you know how many tens of thousands of dollars we’ve saved simply shopping at the thrift store over the past decade? Every single one of those dollars went local instead of fueling a wasteful global oligarchy, we acquired goods at approximately a 10/1 discounted ratio too, sometimes the goods are virtually brand new with 20 year old tags on them. How many tens of thousands of dollars saved by simply hedge purchasing durable consumer goods on discount and simply saving them. I can sit and do nothing for a full year, possibly two, before getting stressed on supplies. Going back for the same thing all the time is pointless, we simply hop down to the storage shelves in the basement. We recently switched to Costco only for our meat, it’s better American grown, we freeze it for later, and never run out.

          It’s an old method repackaged for our modern day, they’re calling it ‘the alternative economy’. We dropped every major label we could whom pushed vaccine mandates, as well as fueling the big corporations whom think they can usurp representative governance. We’re suddenly keenly aware of how 501c’s work in conjunction with special interests and corrupted governance to levy what is a taxation without representation scheme on the masses.

          It’s not over yet James. These people got to where they are at with the power of the purse alongside inattentive consumers. If we want to take the power back, be a more conscientious consumer. If one does not agree what the companies are pushing and who they support, put your money somewhere else. Here, try some different brands. It works for the other side of the coin too, regardless if red or blue, we all need to spend differently, pull our money back from these power hungry tyrants who think we should return to an oligarchy where wealth rules the world. America will never die. Liberty, too big to fail. Bigger than any bank or corrupt WEF group, that’s for sure.

          • Avatar James Anderson says:

            I wish I shared your optimism. 40, no 20, no 10, no 5 years ago I would have. Sadly, over the past couple of years, I’ve read the tea leaves. The individual no longer matters to many people. Liberty is something that most people take for granted. The country is less unified than it has ever been. We are all being expected to hate other that don’t share our beliefs. The instruments of government are corrupt. There is no equal justice under the law. The wisdom of MLK has been forgotten. Now we are supposed to judge people based on the color of their skin. Everyone is a victim. I could go on for hours, but that’s how I see it.

            • Baggins Baggins says:

              Understood. What’s new? The scale of propaganda these days. Recognize the messaging of these special interest groups as being merely a message, a projection, a hopeful conclusion, not yet affirmed. Even if they do temporarily affirm their goals, representative government will eventually roll the efforts back. That messaging which is getting the people down, merely a contrived thing, an illusion, political theater. Ideas are the only thing that matter, most people of the day are pretty much irrelevant.

              On this particular thread we’re on about helping the people captured within this false appraisers are racist narrative, that the appraisal profession is already lost narrative, to understand they’re being played by NGO’s in cahoots with politicians, in a way which is contrary to their best long term interests.

              Have you seen this AI GPT Chat bot thing? Tech nerds of the world are trying to hail this as legitimate AI, yet simple logic challenge experiments prove otherwise. The messaging, merely a construct based on data input alongside the limitations of coding peramiters. It’s quite similar to how a human will respond to preference falsification in peer pressure scenarios. It’s the AVM being more reliable than human appraisers argument in a nutshell, just another contrived political point. That AVM, like the GPD Chat bot, is merely coded, and can be recoded, even manipulated to answer in a completely opposite manner. Same thing for the people responding to the various propaganda, logic challenges are an effective way to turn those little light bulbs on in their minds, help them once again think logically and independently. ‘Everyone went mad all at once, yet one at a time we’re bringing them back.’

              I keep telling them, just because they are giving up their own liberties, does not mean I am releasing mine. I mean talk about a tough sell, they did not really think this through. Convincing 80,000 licensed professionals whom specialize in ethics, they are all completely racist and responsible for a century of federal reserve systems exploitation? What idiot came up with this? It tells you everything you need to know about these creatures, that they played along in the first place. I can’t wait for Mr Bagotts new article to hit this blog, oh man, genius!
              Two Cheers for an ‘Evolved’ Beltway Entrepreneur

              Keywords; Dan AI Chatbot Pick your article, there are oh so many. I’m afraid to even jump in, as I do not talk to robots. You can’t trust robots these days.
              Just think about it, people are already jailbreaking zillow and getting fake comps up there, which is only the beginning. Automated valuation systems unleashed at scale will be immediately exploited, they already have been which is why the avm’s results are tailored to lean to the preference of the subscriber. It’s a damned disaster, an avm is not going to be less biased than a human, it will be more biased, less the ethical and moral restrictions an accountable human provides. People whom advocate to put faith in technology over people are among the most irresponsible dangerous people on this planet.

            • Avatar Mark Davis says:

              Government intervention always causes more problems than it solves. The elite trained Marxists that fashion themselves as “leaders” truly believe that they are “fighting” the income gap. Ever notice how all they ever do is fight this and that declaring war on anything and everything? That is because they only know how to destroy, not build. The “Build Back Better” psy-ops is a cynical joke guiding the herd to the slaughterhouse. I, too, am no longer optimistic that the few can stop the many as they follow these “leaders” over the cliff. But I am hopeful that there is a large enough remnant of liberty lovers to pick up the pieces when the dust settles. The international banking system has collapsed and these fools are performing a theatrical rendition of the cliché “Rearranging the deck chairs on the Titanic.” Good advice above about organizing and preparing with others of like mind for what is coming. I love appraisers due to all the free-thinkers seeking truth and knowledge. This gives me hope.

              • Avatar James Anderson says:

                From your mouth to Gods ears! I hope you and Baggins are right. I’m just growing leery.

                • Baggins Baggins says:

                  It’s one thing to categorically call whole groups of people losers, racists, non essential workers or whatever. It’s quite another to make that stick to individuals in personal accusation scenarios. Those Brookings Institute yahoos did not think this through very well. Brookings is totally off the page, they have 20+ years of previous honest reflective studies which contradict their current narrative. A hundred contradictory reports pointing to many workable solutions, right there for everyone to access online, a thousand different previous better solutions which had nothing to do with calling every single realtor and appraiser in this country a blatant racist. Somehow in their minds they think they can accuse appraisers, then retool the entire appraisal industry, somehow avoid drawing NAR into this. That’s a fail and they’re going to reap the whirlwind if they actually get what they want. After restorative justice appraisals will inevitably come a regular realty agent who is not going to play ball. Heads will roll.

                  It’s like a magic trick, that did not move fast enough, just call all the appraisers racist instead, we’ll embrace taxation without representation and call it equity. A consequence of a run away 501c grant gifting system which continues to escalate. 501c’s have morphed into ways to bypass legislative authority, promote political causes outside of normal spending and congressional approval. They are the perfect examples of corporate welfare. It’s so big, hundreds of thousands of 501c’s constantly spring up every year or so now. The 501c’s have their own 501c’s whom work with other subsidiary 501c’s, etc, etc.

                  The social justice activists may be smarter than AI leadership whom is also co opted into the 501c corporate welfare system, but that’s not a fair representation of the appraisal community at large. You’ve done a great job, we’ll take it from here.

  16. Baggins Baggins says:

    Related to PAVE, letter writing opportunity.

    I don’t know, suggest the GSE’s stop bulk selling entire portfolios to hedge funds and investment firms whom hold everything in perpetuity and rake American citizens over the coals with never ending rental increases, never affording them the opportunity to buy, specifically targeting minority areas for their acquisitions. Creating artificial scarcity and artificially high prices. Just a thought. Is it possible for a hedge fund and investment firm to be racist too? We should invite them to the party. What difference will ‘restorative appraisals’ make while this sort of activity proliferates in national markets? We’d unwittingly assist in driving investors profits sky high, just for starters.

    Research Keywords: (copy this exactly, experiment with various time filters after) “hedge funds” residential housing, “reo”

  17. Avatar Charles Baker says:

    Mary – Bravo for the best rebuttal piece I’ve ever read on the subject.

    There are about 70,000 licensed appraisers and about ten million appraisals performed annually in the U.S. The fact that “dozens” of cases of bias (per the New York Times) have been alleged, let alone proven, is remarkable. While a single case of bias is lamentable, the fact that less than 0.001% of cases are alleged to have been biased should be celebrated, especially given the critical role appraisers play.

    As you so deftly pointed out, the bias narrative relies on straw-man arguments and faulty data. It is a fact that neighborhoods are different. It is our job to measure and analyze the actions of buyers and sellers. We do this by analyzing individual trades, not broad statistical or empirical data. If one neighborhood sells for less than another, we document and adjust for it. If homes in the lower-priced neighborhood were consistently undervalued, there would be a line of investors waiting to swoop up every house in that neighborhood, flipping them for a profit. And if homes in a higher-priced neighborhood were consistently over-valued, we would see mass defaults and foreclosures. Of course, neither are happening but the bias-peddlers aren’t interested in the facts because they don’t fit the narrative.

    Abandoning sound appraisal practice would, in the words of Rep. Maxine Waters at a hearing in 2008, result in the “widespread practice of getting people into loans they can’t afford.”

  18. Avatar daddy from the Nati says:

    Appraisers have been saying for years they need to be represented. All my God, if this isn’t the person, then who is. All 77,000 appraiser should send her $5, to represent us in Washington. Very well thought out rebuttal to what’s going on. Appraisers need to get behind this woman and let her lead for our industry. After reading this article she is articulate and speaks the truth. If somebody knows her, they should reach out and ask if she would be interested.

  19. Avatar Krystal S says:

    Great article!

  20. Avatar Maria says:

    Am I alone to feel that the attack against appraisers is a well coordinated effort?

    • Baggins Baggins says:

      They want to run housing like the stock market. Speculate on the real property for this entire country. When they win, they keep the spoils. When they lose, they charge the losses to others.

      I wrote a long old summary of this industry which you will appreciate to read and save. A framework for such dissertation if you so choose. Feel free to borrow or alter whatever you like. I write for the people, and do not care about recognition or any intellectual content claim. Long nearly thirty paragraph post near the end of the blog roll on that one.

      Seemingly incompetent persons from the managerial class whom constantly push the line in lockstep unison towards a socialistic state? Yep, a lot of that going around lately. I titled this clever news article snippet as; Remove cows achieve communism. A Zero Hedge piece if I recall.

      Do you know why China is nowhere nearly as concerned with climate management policy? The answer is they already have a communist government. One resource after the next, vanished. That is the intentional plan. A new order out of chaos. What used to be science fiction jumped straight off the page into our very real every day lives.

    • Avatar Kenneth Mullinix says:

      Actually, there is a law firm that is doing just that, coordinating with homeowners, like an accident attorney firm so you are correct. I am most likely going to go after that homeowner one day. He has another appraisal done right after mine and he will not release it to HUD so he is hiding something. Hang on, one day….

      • Avatar an appraiser says:

        Kenneth, I had something similar happen to me. A Seller filed a complaint with the state board against me ~ the basis of the complaint was racial bias. The lender ordered a second appraisal which magically was the same # as the purchase price. After 14 months I was vindicated by the state board. I am now pursuing the Seller.

        • Baggins Baggins says:

          One of the most difficult to navigate concepts. ‘Hitting the number’. Talk about magic? When every single instance of buyer and seller agreement is considered bonafide bulletproof reliable data so long as certain peramiters are met. But only applicable after the fact in retrospective data research, even if that is the very next day after. On the same day, oh, now the appraiser is just a number hitter and playing ball for the lender. Really quite simple though. Appropriate to land at or near the sale price if competent comps selection and fair transparent adjustments can lead to that end point of independent conclusion. An affirmation of other participatory persons competency. Or in the case of ‘killing the deal’, or ‘not making value’, a gesture reminiscent of Caesar, thumbs down.

          Appraisers jobs are a lot more simple when the realty staff knows what the hell they are doing. We put the work in when we deal with incompetent agents. I submit the idea that when anyone is complaining about an appraiser, the most probable root cause of such an instance started with incompetent sales agency. People sometimes comment; You came in higher than the other appraiser. My response; The problem with appraisers is that when they get to the point of knowing the client will be satisfied, they quit grinding. Likewise on the other side of the coin when pressure is applied and expectations are not met; I do not set the market, I only read and report on relevant data.

        • Avatar Pat Turner says:

          DO NOT GIVE UP PLEASE!!!!!

  21. Avatar Maria says:

    I am collecting data to peer review the neo-marksziszt attack against the appraisal profession. I can say this. I grew up in a communist country, and my family and I have first hand experience with marksziszt “inclusions”. I also was thought in the school up to college the marksziszt ideology, history, and path to succeed. I have the experience and the knowledge. Possible the best person in the appraisal profession to shed light on what is going on against appraisers.
    ps. as all of us see it hopefully, this attack is not only against the appraisers, but is going on against the military, the medical professionals (started during the pandemic) etc. now we are lined up. marksziszts first destroy, than they rebuild: they rebuild the new elite, anyone else has no rights. If you do not agree with me, please take the time and read the comuniszt manifest, then I am happy to discuss with anyone.

    If you have any information I might use, please do not hesitate to reach out to me. (This will take years per my plans. I am going back to college, and this is my topic for my dissertation.) Thanks, Maria
    Not a misspell, it was purposefully written that way. I feel I live in a marksziszt country again, where I cannot say what I want to say, I must use “rose language” again. great!

    • Baggins Baggins says:

      Thank you Maria. Keep reading, we’ve been deep diving into so many issues for the past decade on this specific website. What makes this site unique, is the site manager does not answer to anyone, and rather maintains absolute journalistic integrity and free choice in both content management and blogger participation.

  22. Here’s an article by the ACLU on the racial wealth gap. They didn’t blame appraisers. They stated it was the income gap, homeownership rate gap and mortgage gap. The income gap causes the homeownership rate gap and the mortgage gap. Everyone else understands this except HUD. HUD is being bamboozled by lenders and politicians with their own agendas. Lenders want to make more money by using AVMs. Politicians use this false narrative to campaign to get votes.

    • Baggins Baggins says:

      Mary that’s so rich. When the popular narrative is contradicted by the ACLU, of all the organizations out there, the ACLU… HUD people sitting around reading that; ‘We’ve got problems.’ Post that link over and over and over again. Will look forward to reading. The impossible find, wow.

      I’m not even sure why I’m personally invested in this issue, nobody accuses me of such activity. It’s just, a never ending stream of anti appraisal industry destroying activity sanctioned by taf and the amc’s. They literally scheme every day of the week how to get rid of and diminish the independent appraiser.

    • Avatar Maria says:


      DO NOT FILL OUT FLS or other’s fee questionary!

      I got from FLS a questionaries’ about the reasonable and customary appraiser fee. It will be illegal to use this data.
      1. Third party has to do the research. They are not. (Neither AMC nor mortgage companies can conduct a research, per Dodd Frank)
      2. They want implement a fee cap. They ask what would be customary fee in the area. The max you can chose is $600.

      I just read the first question when I deleted it. More illegality might be present.

      ILLEGAL, do not participate in it!

      Fight with them after the “research” is done will be more difficult.

      • Baggins Baggins says:

        Maria, this FLS? Image attached.

        Please save and provide screen clip images of this process of limiting appraisers fee entries.

        Someone should provide that to the FCC in the vs Louisiana board case.

        In reality though, what you are observing with an amc asking you for a fee survey is not a survey at all, but rather a litmus test. If you happen to enter a fee lower than any other appraiser, the amc will be inclined to give you a hell of a lot of work. Because you’ll be offering them a thing of value in return, as they’ll rake the difference between your fee, and the consumers fee, and will not return cost savings back to consumers as they should in a volume discount model. The appraiser provides volume discounts, the amc keeps the difference, consumer does not save a dime. Legal bribery. Pay to play schemes. Unearned fee raking. Junk fee billing. Basically, every day of the week activity for the amc industry. When dodd frank reg z first came around, there was clear guidance amc’s should have been fined $10k per instance, with $20k per instance if the violation recurred the next day.

        That’s not a fee survey as you may perceive that as a lender asking. Since a lender would traditionally fee survey all their panel appraisers to see what the most commonly accepted regular appraisal fee would be, and that’s what they’d compensate to keep the appraisers working and retain as many of them as possible. With amc’s the process is different, because they’re vultures and thieves. The amc issues fee surveys to identify, then target in a predatory fashion, the appraiser willing to play ball. All the appraiser needs to do in order to steal all that work from other vendors, is play ball with the amc and do not disclose their fees to the consumers. Junk fee billing 101 but is effectively unregulated because with amc’s, only the one sacrificial appraiser holds a license, all the junk fee raking employees and owners are not required to be licensed and are never held accountable. Lender looks the other way, counting their increased income by offloading appraisal related management costs to the appraiser.

        If you really have visual evidence of a fee cap that is sort of a big deal. Not like anyone will do a damned thing about it. All this other brazen criminal activity right there in the open for everyone to see and still, nobody does a damned thing.

        • Avatar Pat Turner says:


          What is the ACTUAL and LEGAL FEE?????
          I would submit that it is the fee stated in the HUD 1!!!!

      • Avatar Pat Turner says:


        Please forward me every letter that sets a fixed fee!!!
        You are right, it is illegal.
        We want the direct evidence!!!

  23. Avatar Maria says:

    Mary, I had an itchy feeling that banks are stirring all. They are crying that appraisers are too expensive. What is a percentage of an appraisal cost today per the mortgage cost, vs. 10/20/30 years ago? Banks set the appraiser fee. They decide who gets the mortgage, but the appraisers are blamed.

    I feel they turn appraisers against AMC, and they laugh. Small AMCs default, but the big ones eat from the same plate with the banks… We do not need AMCs, but do not forget, they were implemented to protect appraisers AGAINST BANK ACTIONS…. Mortgage companies again are the winners. Destroying the appraisal profession, and when the banks fail, blame appraisers, again… shiny future….

    This week 2 AMC told me that they barely make money, and they explained it to me. Reasonable. There is a reason why so many AMCs were bought up by larger ones in the past years, escalating during/after Covid…keeping their name to fool everyone that there is still competition?

    • Baggins Baggins says:

      You have been in contact with two different amc’s, within a weeks time? I have identified your primary appraisal problem.

      Years back we were researching consolidation trends within the amc industry. Many start ups were bought up by some big box ones here in the US, as well as being bought up or somehow integrated into title companies, both US and Canadian were the trends. However the entire world is the limit when sensible standards are rescinded such as using licensed appraisers whom physically reside in the same state and can make it to said properties. Imagine raking half of a vendors fee from a world away and they would have no choice but to go through you in a pay to play scheme if they wanted to remain employed in their fields.

      Additionally, the word has long since been out to mortgage department managers that if they utilize an amc, and especially if they form their own amc centric to that brokerage, they can rake back some appraisal fees as unearned fees not appropriately disclosed to consumers. Although likely not hand to pocket, the benefit is still there such as establishing additional margins for business write offs, freeing themselves of a few employee expenses, shifting that cost and liability to an ancillary company, aka the shell game. Voila! Additional profits on the books, although nothing really changed with volume. Offloading expenses to third party companies to increase profitability and stock prices, etc. But really the third party operational cost is borne on the backs of the appraisers and no longer borne by the lender in a traditional model. Which of course crushes the appraisers further. As my one appraiser pal used to tell amc’s, you’ve got a bright idea which has been done before. Unfortunately you can’t squeeze any juice from a lemon already squeezed dry.

      For the comparative fee argument, that is a problem which is rooted in several issues, but primarily the federal reserves relentless devaluation of our currencies which builds to rampant inflation while promoting unscrupulous business practices. Keynesian economics if you will. One reason the US has been resilient to such a disconcerting end is the merit of scale and having dominance in financial systems, aka; the petrodollar. However, the effects of rampant inflation remain glaringly visible. They engaged in QE quantitative easing for so many rounds, and tried to bury it all in corporations and residential housing. Goldilochs is busting out and housing price appreciation going multiple times over within a mere decade or two proves this. First receivers skated off like bandits, but then again what’s new.

      The imbalance for appraisal service costs specifically are best examined through a historical lense in comparison with realty agency and commissioned brokers percentage points for compensation of services. A long long time ago, $100k property, let’s just say off hand 5% agency and 2% mortgage broker commissions. There goes $7k off the top. Appraisal was $500 dollars. Otherwise a half point. Due to the affordable nature of housing and relative stability of the currency at least compared to today, real property and lending markets coasted along somewhat smoothly. People were less inclined to dip into homes like they were atm machines, and had more flex cash which was a major contributor to GDP gross domestic product and other factors pointing to a stronger economy. That was then.

      Flash forward a decade or two to several dozen rounds of QE, many of which were not disclosed to the public and we only learned years later were distributed behind the scenes to first receivers of the money. Now there is a new dynamic. That same home in the same condition costs $400k. Mortgage commission and realty sales agent compensation figures slid back to account for the increased cost, while they maintained strong income gains. Being part of the sales service for that same home now compensated people in those industries 2x,3x, or in some cases if they were able to maintain that traditional high point model, a full 4x or more compensation comparative to what they used to earn. As home prices increased, they continued to get ahead. And every single time a home turned over, those agency fees were buried into long term amortization of the loans.

      Irregardless if the loan package was sound or the people went under or were stable, all the people got paid a kings share. There was increased pressure to continue QE as well as provide capital and incentive to issue more loans more often. And just on a side note, the appraiser was still being compensated $500 per, but had some modest gains in efficiency where theoretically many appraisers could get twice the work done in half the time. So appraisers broke even for the most part but were able to keep up to a degree, while feeling that creeping chill of slipping behind, their end ever nearer as real world comparative income for appraisers slipped from on par to half, to a quarter of what commissioned agents make. Appraisal became a couch position or boutique business. And as many appraisers fulfilled those positions for consumer protection reasons, they were reluctant to push their fees quite as high.

      And here is the zinger, what this essay is all about; The market resistance to increased appraisal fees is because the appraisal fee is one of the few hard costs which can not be financed into loan packages, while the majority of other commission based fees remained soft costs, able to be rolled into long term loan packages. Who cares about the thirty thousand compensation for agency when that’s just a few dollars a month on a thirty year amortization cycle? It was the cash out of pocket for the appraisal which really hurt.

      Hence the lending and realty industries disingenuous cry for reducing appraisal costs. One; Because if appraisal fees would have kept up with other agency, we’d be getting $2k+ per appraisal right now (matching their comparative multiplier gains alongside inflationary trends). Two; Because by focusing on the out of pocket costs, this assists commission based agency in keeping the attention elsewhere, while they raked a years worth of income comparative to a regular job, for every few deals they put together in a months time, every ancillary service raking weeks worth of labor and income from every deal every time, aka; closing costs.

      Banks do not set the appraisal fee per se. But with mortgage borrowers being against the wall on affordability in general, as whenever inflation happens effective income never keeps up with actual rising costs (the CPI is a tale of fiction and is nowhere near accurate due to behind the scenes first receiver handouts which are not accounted for). The bandits engage in a synchronous dance where in order to keep the gravy train going, they all point to the hard cost as ‘saving people money’. Hence the difficulty for appraisers raising fees. Enter the amc companies whom often drive up consumer costs, drive down appraiser vendor fees, and pocket the difference. Finally, someone was able to get that appraisal fee up! It’s about darn time. The progression of that activity of course is to perceive the whole appraisal fee as up for grabs. Enter PDC’s, hybrids, bifurs, desk only products, etc. Guess who’s going to still pay that full service appraisal fee, even though only a sliver actually goes to the appraiser. Winning! (lender and sales agents kicking alligator boots back on rainforest wood desks, cigars and fine whiskey in hand.)

      The alternative would be for people to have skin in game with their sales efforts and be forced to pay out of pocket the entire load of soft costs, the entirety of agency commissions up front. Basically to eliminate soft costs. But then, how could they continue to bury QE in residential housing and associated mortgage efforts? One ponders why the appraisal can’t be included in soft costs, if they’re newbs. The appraiser is the only person compensated regardless if the deals go through. That increased appraisal fee which kept up with the times would really dig into peoples pockets if they were still paying a half point to the appraiser, and those loans never actually were originated. That activity might result in consumers actually paying attention where the money goes and perhaps dare to dream even slowing down on house flipping and paying loans off instead of constantly renewing them in the refried refi game. We certainly can not have that.

      Tales of poisonous protectionism from the crypt. Most people can not fathom the elegance and effective nature of this system and decry lack of equity or blame individuals instead. Face the facts; brought to you by the federal reserve. Because if they were not inflating the money supply, that home would still cost $100k, and we’d all still be getting a fair share. People would be paying out of pocket hard costs for commissions, they’d get far better representation too. I’ll post this meme again, hopefully some will have a renewed understanding of what this actually entails.

    • Avatar Pat Turner says:

      Maria, It’s all B S!


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The Real Cause of the Home Value Gap Is the Income Gap

by Mary Cummins time to read: 10 min