‘Pesky’ Words. Keeping Appraisers out of Language Purgatory
Appraisers, on July 17, 2023, a document from Freddie Mac was circulated to numerous appraisers around the US which identified certain words and other info that can be considered to be ‘BIASED’ in appraisal reports. Here is the Link to the Bulletin.
We need to step back for a moment and carefully analyze and consider why that was done, and what it means to appraisers.
In many ways, appraisers forget the purpose of the appraisal assignment – which is to value real estate. In other words, the physical structures tied to the land.
But too often, elements of personal or neighborhood demographics or other comments seep into the reports. Maybe not consciously, or on purpose, but because appraisers are not critically reading what they write and may not realize the implications of how what they write can be interpreted.
I’ve seen many responses since then, both sent to me and on various forums. Far too many appraisers believe their ‘independence’ is being threatened. Actually, the opposite is true.
Paying attention to words and phrases and other information about the DEMOGRAPHICS of the neighborhood or people residing therein, and then removing those, will keep the appraiser out of language purgatory, and will insure the report passes all lending guidelines. Again, your focus has to be on the structures and land, not the people, in a particular area.
One word that pops up frequently used by many appraisers in comments about this topic is “Gentrification.” Appraisers are using that word as an attempt to describe how a particular area has changed – and it may have. The problem is this word by itself has adverse connotations because it can be interpreted in several ways.
Per the most recent edition of the Dictionary of Real Estate Appraisal, ‘Gentrification’ has this definition:
Secondarily, from what I’ve been told, this word has a more direct and adverse meaning in “black” neighborhoods. There ‘gentrification’ means “whites” have been buying up properties, moving in, and displacing “blacks.”
Can you see how use of this word this raises the hackles of report users who are sensitive to incorporating anything in reports having to do with ‘people’ when valuing physical real estate?
Some appraisers are fond of mentioning a certain school district in reports. That’s a ‘people thing’, not a real estate thing, even though the property may be within that school district.
Appraisers have to learn to write about neighborhood physical properties, i.e., the real estate, not the people-oriented aspects.
Another item that pops up far too often is the reliance on third-party descriptions of neighborhoods. Many appraisers use Chamber of Commerce websites or similar sources which normally contain references to ‘people oriented’ aspects of that area. And far too often, these sources are given no attribution. In other words, copyrighted material is just copied and pasted into reports without identifying the source. Don’t do that!
One more item. While it is accurate data by a governmental agency, it should not be used. That’s US Census Bureau data relating to specific DEMOGRAPHIC information about the residents of a certain neighborhood area. Too many appraisers just copy and paste this info which shows X percentage of this race lives here, and Y percentage of that race is also residing here into the Neighborhood Description on report forms. Quit doing that!
The final point is this: appraisal reports are now thoroughly ‘read’ by that giant “AI machine in the sky.” When appraisal reports are uploaded to a lender/client, the first thing that happens is the report is sent through the GSE’s UCDP big data monster computers. (Or if FHA or VA, a similar process.) Over the years, the machine learning has been modified and increased, such that ALL pages in reports are now scrutinized for the offending words or phrases that are considered to be verboten. If the UCDP catches any, the report is rejected, and eventually the appraiser will receive a correction notice. You will have to re-write those parts of the report in order to have your report pass through the system.
If you begin reports by using a pre-written template, carefully review it for ‘those pesky words.’ And if you are an appraiser who starts a new report by cloning a prior report, you will have to be especially careful to diligently read what was written prior and be sure ‘those pesky words’, etc., are modified in the new report.
In closing, concentrate on describing REAL ESTATE in specific, not subjective verbiage. And not people or items directly or indirectly relating to people.
Dave Towne on e-AppraisersDirectory.com
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Great article Dave. Quite right and an interesting way to distinguish between professional real property related language vs as you say ‘people orientated’ language. Interesting take. I prefer a more simplistic description. This neighborhood is a larger expansive development which consists primarily of 70’s to 80’s built single family detached houses, where most are two stories, some bi and tri levels present, a few ranches. Basements are typically present in most units. Land sizes are generally consistent and garages are random, some have one, others two or more, some none, so it’s best to simply adjust parking out rather than using parking as a sort criteria. Property renovations are common and available units are often competed for by a variety of market participants, both individual buyers, investors, and property rehabilitators whom have contributed to a general reduction in effective ages. etc. etc.
Also when you pushed this email I found this one interesting word reference. Several years back one of the GSE’s pushed this word specifically as a prohibited word in appraisals; homogeneity. I found it just hilarious that Radian the asset management related company actually switched their business name to just nearly that exact word, and that the GSE’s use that word repetitively in their descriptions of the appraisal community. What’s the point of using pre written anyways? One can steer clear of excess review risk, especially in these days of more technical review functions, by simply always free writing descriptions which are accurate to the neighborhood and current. If one types fast it only takes a minute or two to fill out any given free writing field. Appraisers should get better at actually being appraisers. That would mean being able to not just talk the language of real estate, but also write and type that. If one is actually well informed, there really is no need to have to reach out to any other information source to copy anything. Or from another perspective, anything an appraiser may find out there, is also data the lender and intended users can and probably will find as well. If we want to maintain relevance we need to stop being automated ourselves. Additionally pre formed commentary is just asking for trouble because if one slips up or errs, then repeats that activity over and over again, one risks more than just a single review stipulation. Thanks.
Dave, Thank you for this article and the Freddie Mac link for those that may have missed it previously.
I’m saddened that it’s come to the point of “policing words”, but I agree with your comments about where our focus should be. Honestly, I won’t have to change a thing about wording in my reports as I’ve never included any of the “flagged” wording. However, I’m sure that list will continue to grow over time and sooner or later we will ALL need to learn to use better wording to describe things that may affect the market.
I remain completely amazed (and angered) that APPRAISERS do not have access to the UCDP, even though it is OUR work that is fueling it. It makes absolutely NO SENSE.
I do sincerely believe that the vast majority of Professional Appraisers work hard to be neutral, unbiased and not advocate for any party. I think some Appraisers think they are looking out for the “client’s” interest. That’s incorrect.
Professional Appraisers protect the PUBLIC INTEREST. We always need to keep that purpose as we work.
THAT is where our value is. THAT is why we can never be completely replaced….as long as we fulfill that purpose.
I do believe that we need to do a MUCH better job of educating the PUBLIC about what Professional, Independent Appraisers actually do. Otherwise, the narrative that’s out there continues to demean us and to make it seem as if “automation” is the only way.
Again, thanks Dave for a well written article we needed to read. I appreciate it.
Agreed. I was writing an article for the blogs but set it down for a while. This is one paragraph from that soon to be article though below. In response to UCDP, yeah, years ago we were posting links on this site to the patents filed which the CU system software was built upon. I actually tracked those down, read and posted dozens of different patents for software which was utilized to build those systems. They get the benefit of intellectual property, appraisers do not.
The back story to CU development is that this was always a special interest program, funded, developed, and the technology which was utilized, already owned by companies whom could be considered to have a conflict of interest when utilized in such a manner. The goal from the CU’s inception, has always been to replace the appraisers with automation. MISMO followed, then UCDP, then forms rewrites. All meant to remove the appraiser. What the technical systems fail to achieve, is moral and ethical understanding, which is what makes their fluid logic dangerous. Every time I think of the CU system my mind kicks out a stack overflow error and alerts me to logic faults, which I promptly shuffle to the irrelevant thoughts file for later deletion. lol.
Appraisers like myself are the last of a dying breed; focused solely on mortgage lending and default management, but refusing to work with amc companies. We maintain the position our goals are service to the public by way of regulated government institutions involved with mortgage lending. You know, in support of the American dream of home ownership?
” If the UCDP catches any, the report is rejected, and eventually the appraiser will receive a correction notice. You will have to re-write those parts of the report in order to have your report pass through the system. ”
That is not entirely true. I have had several reports raise a review flag for potential bias, fair housing, etc.. I do not change anything. The report is accepted and I am yet to hear back from anyone.
Oh, well, that happens all the time. The risk point is when a borrower defaults. That’s when an appraiser is placed against the wall and it’s too late to change anything. I had a lender hassle me about all this language which I felt was irrelevant. Like I always recognize actual mailboxes and think it’s nifty to make a positive statement. Was saying, real mail box service, good, and felt to be superior than neighborhoods with group boxes. They took issue with this and asked for many rewrite points, nitpicking every instance of a positive statement. Basically they perceived the color language, being the messages of positive writing, to be potentially biased. It was just fun commentary within a report, things impossible to offend, flagged anyways. At first I was like am I going to lose this client over these silly issues? Then I stepped back and reconsidered, although I love free writing, it was an acceptable client position to ask me to not use color commentary in my reports. So I switched to a more pragmatic description, less the color commentary. I used to use terms like an impressive remodel, great to see the real mailbox, appealing color alterations to paints and home themes, etc. Simply switched to a similar language, still describing the feature, less that personal touch that wow this was popping and cool. If they want boring reports, and that’s what they’re paying for, I can provide that. Thanks. Also when it comes to demographics, just leave all that out, because in the real world, people know where they are at, no need to even include anything of that nature. Thanks.
I used to use the word diverse in my reports, meaning showing a great deal of variety, however I was informally flagged most likely because it can also mean, including or involving people from a range of different social and ethnic backgrounds and of different genders, sexual orientations, etc. Considering the word was used to describe varying building types, high rise, mid rise, low rise, 2-4 unit, SFR’s, and or present land uses, multiple military bases, ship yards, Indian reservation, professional sports stadiums, large government complexes, etc., I had no idea that these things could be have a sexual orientation and get offended.
Seek the truth.
Honestly, some of the words make sense, some of it just bureaucratic over-reach, with what we can and can not describe the neighborhood characteristic’s and what all does and does not transpire in any given neighborhood. Heaven forbid we discuss what types of buyers are willing to purchase a homes in any given market sub-set and any social stigmas and external factors that could quickly alter a neighborhood’s market active for higher, lower or cause it to stall. It’s as if they really don’t want to know what is going on anywhere, or the facts about the property and it’s surroundings. Do what we say, when we say, how we say, or you get a slap on the wrist, handed over to the state agencies for investigation (of whom are rarely licensed themselves not qualified to review appraiser’s work) and hand out more love letters indicating your not a team play (not literally). When is someone in congress going to call out the present and past administrations attempts to just shove the checks and balances appraiser’s provide to the side, so the “investors” can keep the money machine going? I really won’t know where to begin to locate someone that would actually care…
They’ll begin to care Spencer, when the losses start flowing. That’s how this industry works, corrections in retrospect. Otherwise, business as usual. One day they will care, because the investors will demand heads roll. That’s what many people, even many policy makers don’t understand. The GSE mechanism in it’s current form prioritizes selling loans to investors, not necessarily following it’s original mantra of providing expanded lending access in pursuit of the american dream, by way of guaranteeing government backing of said investment instruments to create safe loans. It’s all about risk vs returns and the rising mortgage rates are a reflection of pending market instability. The goal of automation is to prevent a crash and shore up losses, but the benefit will be an illusion, people will continue to default. That’s what I’m on about when talking about first purchase opportunity benefit being throttled and limited to only those bulk buyers on the auction block. Because otherwise we’d have seen these defaults already, with treasurer notices jumping to levels not seen in the past 15 years (it’s true just check your own counties treasurer notices). And those defaults would have already had a downward pull on general market values. Rather, this is now shuffled through in the back ground, aka; artificially propping up the housing market. Enter the ibuyers whom are also said portfolio investors, with vested interests in not letting the market crash. For individual borrowers, straight out of luck, full loss load and no trickle down benefit of reduced pricing due to an excess supply of liquidated properties. It’s quite ingenious really. GSE’s and groups like PAVE claim they want to help all the people achieve home ownership in a fair manner, but the very moment an opportunity for an affordable purchase may show up, they look the other way while big corps speculating in residential bulk buy the units to hold as REITs indefinitely. First Look programs? We don’t need those standing in between corporate profits. There is no such thing as residential anymore, it’s all commercial. Equity!
https://pagetwo.completecolorado.com/2023/04/26/caldara-central-planning-housing-affordable/
Here, check this article out. There is a lot that happens behind the scenes which effect housing pricing. Just when you think you know what’s happening in real estate, read an article like this from a policy watchdog group. Knocks your socks off and it’s right there, so obvious, but people don’t understand how the intricate bureaucratic activity works against some people, and for others. Hold on to your 50’s through 2000’s built properties, because everything new is ultra lux, corporate, or hoa controlled. In the future these will be the most coveted of all properties, because everything new will be high density and/or corporate owned. And believe it, these people know exactly what they are doing, the political theater and social justice equity messaging is just there to distract the masses. Oh lord, I’m about to post a meme…
School districts may be a “people” thing, but it has a huge impact on value in my market. Not sure I understand this point.
neighborhood crime rates, amount of commercial land use, proximity to mass public transit with a larger transient populations are things that effect who will buy and for how much. This is the type of things that we can not discuss. That is the point.
And… in one fell swoop, the government, which accumulated the data, eliminates the entire appraisal concept of external obsolescence.
Boycott all orders. See how long these AMC’s can exist. Refuse all FNMA work. Let them squirm. Taking the rest of the summer off. Impossible to make a decent living any longer
They already have a workaround. IF they can’t find an appraiser to complete the work, they convert it to AVM. Push comes to shove, they already have a workaround. We need a legal apparatus to stop similar loop holes.
I especially like being rejected for using the language that states that I have NOT used race, gender, or serial orientation as an appraisal factor. Just having the words in the report kicks it back. The exact verbiage suggested by the FHA.
School districts are not a people thing. They are an economic factor that all buyers consider. Property taxes vary widely depending on the district. School district is almost always a search parameter in my assignments.
That’s a tough one. Talk about taxation basis differences instead? Then they could not claim. Oh yes the schools influence local housing, absolutely. Some of the school districts have lost their damned minds, not safe places for children, or adults. We pulled our children out. Completely biased, outright in the open. Their silent revenge; certifiable reductions in property gains area wide, compared to districts with a different approach. Me and my wife have weekly conversations, if we could just somehow make it over the line to the other districts in Weld county. We’re late to the party, homes cost more there now than they do here. Previously, prior to policy changes at the schools, this was not the case. So obviously we’re not the only ones whom feel that way and parents needing children in reliable sane schools has become a very strong market influence item, especially in Colorado. They have ruined public education through nearly this entire state, except for key districts. And guess where everyone wants to move to as a result. It’s on buyers to do that research, and is not the appraisers responsibility to keep them informed of school districts. The full length listings and other MLS tools have the school district identifiers. Appraisers don’t need to mention. If there is an obvious price value barrier because of this, find another way to describe the condition. I deal with that now and then; For one reason or another, homes on this side of the highway sell for much more than the other, and therefore, I have limited comparable selection to only one side, the same side as the subject resides. Something like that.
Great comments Mr. Donk. I only do narrative – non-lender reports – each stating which school district a property is in. Also each comp. write-up states its school district. And yes, property taxes can vary widely by school district in our region. School districts affect value. Giving into the power grabber’s NEWSPEAK practices is destructive to our profession, market participants and our country. Another nail in the coffin. But that, is just the way it is and you just have to play along – and the power grabbers are well on their way to achieving their ultimate goals – and roll-over appraisers are awarded certificates for their non-resistant assists.
I guess we shouldn’t discuss or identify resort communities because they are people oriented/dependent.
You shouldn’t reference in any way, shape or form that a property is in a farm community because someone might be offended who hates the (in their deceived mind) climate destroying farmers and think we should all eat bugs (except for the power lords of course that are not bound by their own dictates and will eat their steaks, shrimp and extravagant desserts).
Be sure not to mention: being located next to an active railroad tracks; lead in the water; the plat has a pool and tennis court; and on and on and on………………….. Laughably sad.
This word policing is and will constantly be a moving target that is dictated by unelected people who are accountable to no one.
This is my last post here and thank the Lord I just retired!!!!!
If they don’t think people consider which school district a house is located in, then they are more concerned with wokeism than with real estate values.
Why is there still a line adjustment for location? we should be able to differentiate between locations of homes near industrial areas versus homes that are surrounded by residential subdivisions? Is that biased?
Doug V After reading all these blogs, and agreeing with you all I think “do we do it their way or USPAP’s way” Isn’t their way Misleading by Omission?
The only part about this word policing that bothers me is that the word in question most of the time is taken out of context. The system only looks for the word and not how it is being used. For example a statement about the color of appliances such as white or black appliances can not longer be included in the appraisal. Now I state Non-Stainless Steel appliances. Since the word policing has been in place I have had revision for saying “mature landscaping” and “Indian Reservation”. The use of the word Indian I can understand but the others being taken out of context and just judged on the word itself I feel limits an appraiser from accurately describing certain things. It would have been nice for the GSEs and others to let Appraisers know they were 1. going to start policing words and 2. to have provided a list of the words they anticipated being unacceptable.
“It would have been nice for the GSEs and others to let Appraisers know they were 1. going to start policing words and 2. to have provided a list of the words they anticipated being unacceptable.”
It would be nice if they would stop playing stupid games, but we all know that’s not going to happen.
I don’t usually use templates but I got to thinking since they are so into individual words why not make a neighborhood description of words. It would probably work for most of what I need.
Neighborhood Description: Houses, streets, grass, signs, lights, concrete, stores, utility easements, fencing, schools, fire hydrants, animals, birds, vehicles.
https://www.nclc.org/resources/letter-to-the-appraisal-foundation-regarding-declination-of-invitation-to-join-the-council-to-advance-residential-equity/
Various organizations decline taf invite to join care group. 02/2023
Play the banned language drinking game. Get out your red pen and issue a revision for every instance of language which would not be acceptable in an actual appraisal report.