Teaching Appraisers to be Biased?

[TerryRohrer]

The following was reportedly included in a McKissock CE course. I guess this would be the opportune time to resurrect "public interest value" from the early 90s. The same "non-economic principles" could be leveraged and expanded.

In the same article, Mr. Mock writes, “The sales comparison approach, the primary appraisal method used by real estate professionals for owner-occupied homes, requires appraisers to determine a home’s value based off the sale prices of similar homes in the same neighborhood. Because of racial segregation’s enduring effect of undervaluing Black neighborhoods, this approach has carried the legacy of artificially depreciated housing prices from the days of redlining into the present, while allowing for houses in white neighborhoods to appreciate over time. The appraisers’ current valuation processes have not only been exacerbating the racial appraisal gap, but also the racial wealth gap, given that homeownership is one of the primary ways that U.S. families accumulate wealth.”

According to the article, the Brookings Institute has launched an initiative that will award up to $1 million to the person or organization that can come up with a new method or technique for appraising residences that will produce racial equity.

 

[CGinMN]

According to the article, the Brookings Institute has launched an initiative that will award up to $1 million to the person or organization that can come up with a new method or technique for appraising residences that will produce racial equity.

https://www.brookings.edu/wp-content/uploads/2021/01/Ashoka-Brookings-Challenge_Press-Release.pdf

Now it makes sense what Doug Potts is trying to do. Make a mil…

 

[George Hatch]

One of the Brookings guys made some crack about perhaps we need to go to the cost or income approaches to overcome the racist nature of the sales comparison approach. Apparently without being sufficiently informed on appraising to understand that location affects land values in the CA and rents and GRM/GIM factors in the IA. All of which will lead to the same outcome, assuming an adequate quantity of that kind of data in that neighborhood.

Meanwhile and IRL, sales prices are negotiated between the buyer and seller prior to submitting the loan application. The appraisers aren't anywhere nearby when those negotiations are conducted. Not to mention the point that people buy mostly on what that price will buy, not independent of those prices. That's one reason why most brokers select the comps they want appraisers to consider based on their respective prices and not on the property attributes the appraisers are searching by.

 

[TerryRohrer]

https://www.brookings.edu/wp-content/uploads/2021/01/Ashoka-Brookings-Challenge_Press-Release.pdf

Now it makes sense what Doug Potts is trying to do. Make a mil…

Yeah. I have seen his mindless garbage.

 

[Elliott]

The DOJ dropping lawsuits every six months is one method of warning appraisers that they are expected to always make the number (heaven help the appraiser who can't figure out ethnicity or the history of a property's valuations for the last 10-years). If there was a DOJ lawsuit every six months when an appraiser 'over-valued' a property, then they would be sending a different message. The final result of PAVE will be unintended consequences. Appraisers have become like the accomplished Colorado cake maker who won't make a cake that offends him. Eventually the courts will figure it out, but not before billions of dollars of damage and compromising the valuation profession.

 

[RCA]

The following was reportedly included in a McKissock CE course. I guess this would be the opportune time to resurrect "public interest value" from the early 90s. The same "non-economic principles" could be leveraged and expanded.

In the same article, Mr. Mock writes, “The sales comparison approach, the primary appraisal method used by real estate professionals for owner-occupied homes, requires appraisers to determine a home’s value based off the sale prices of similar homes in the same neighborhood. Because of racial segregation’s enduring effect of undervaluing Black neighborhoods, this approach has carried the legacy of artificially depreciated housing prices from the days of redlining into the present, while allowing for houses in white neighborhoods to appreciate over time. The appraisers’ current valuation processes have not only been exacerbating the racial appraisal gap, but also the racial wealth gap, given that homeownership is one of the primary ways that U.S. families accumulate wealth.”

According to the article, the Brookings Institute has launched an initiative that will award up to $1 million to the person or organization that can come up with a new method or technique for appraising residences that will produce racial equity.

I have a method that is unbiased - but no method is going to produce "racial equity" when appraisal is not the cause of racial inequality.

Past racial inequality was caused by initial slavery status for the black race and its association with skin color in combination with other racial characteristics. That has since been removed, but the long-standing after-effects of racial neighborhood choice remain and are relatively permanent (low elevation, poor drainage, and other poor geographical features). Current racial inequality, aside from historically created differences in location and construction methods, is caused by AVERAGE differences in intelligence, energy, motivation, infrastructure, and resulting income. You find varying levels of these traits in all races around the world. You will discover slums in most countries, which are have significant groups of low-income. Of course, some countries don't have any slums at all, such as Germany, Finland, Sweden, and Norway. Denmark and Belgium are reported to have one small slum (< 50 people) each. All Asian countries, except Singapore, have slums. All South American countries have slums. Russia and many Slavic countries have sizeable slums, including Ukraine.

Brits say they don't have any slums—like in the US—but they do have many run-down areas and streets that need repair. They also take care of the low-income.

The US has plenty of slums—everywhere—in nearly every populous state. Appraisers don't stand a chance of fixing that problem other than to CORRECTLY report what they see so someone else can possibly start to alleviate the problem.

My suggestion is to start low-interest loans for people to build in the lowest income areas, paid by adding a small percentage interest on home loans in other areas.

 

[sputnam]

Appraisers didn't cause segregated neighborhoods... nor the variations in value among neighborhoods. And appraisers can't the perceived inequities. Appraisers can't force buyers to buy in other neighborhoods. Appraisers can't change the values perceived by the market. So, why go after appraiser bias? We are an easy target. There are relatively few of us. Most people do not understand how we do what we do. There is little political downside to bashing appraisers but, potentially a huge political upside.

 

[Tom D]

Which came 1st. The appraisal or the purchase. So which one was the racist number. Right now it's systemic racism somewhere, so let's find it. You can make a great living finding it, and saying, i found the perception of it.

My suggestion is to start low-interest loans for people to build in the lowest income areas, paid by adding a small percentage interest on home loans in other areas.

This city was almost rebuilt with the last low interest rates. But that's because you could make a profit doing it. There are some bad lands that you couldn't do it. One day you start the rehab, the next day the appliances are gone. So, are we going to subsidize that neighborhood, although at a low interest rate it is cheaper to own than rent.

 

[ucbruin]

You okd dudes are so weird about this issue....
I'm betting less than 1% of forumites have ever been accused of bias....

 

[Overimprovement]

You okd dudes are so weird about this issue....
I'm betting less than 1% of forumites have ever been accused of bias....

But the results can easily be career-ending, even with no guilt. It is a real threat as long as there is no advocacy for appraisers anywhere. We are truly like ducks in a shooting gallery.