Appraiser Bias - There's an App For That

[TerryRohrer]

“The platform offers webinars about how homes are assigned value and about bias. Appraisal bias occurs because of factors such as conscious or unconscious racial bias in real estate industries, disinvestment in Black neighborhoods, and decades of racist and segregationist housing policies and systems.

The app also generates a scorecard for appraisers to let those with lower scores know they may need more education. The WEALTH Collective also plans to create a certification course for appraisers that it hopes will one day be required for professionals who want to work in the city.”

MSN

 

[shrubberyvaluation]

“The platform offers webinars about how homes are assigned value and about bias. Appraisal bias occurs because of factors such as conscious or unconscious racial bias in real estate industries, disinvestment in Black neighborhoods, and decades of racist and segregationist housing policies and systems.

The app also generates a scorecard for appraisers to let those with lower scores know they may need more education. The WEALTH Collective also plans to create a certification course for appraisers that it hopes will one day be required for professionals who want to work in the city.”

MSN

Let me guess, it has talking points like PAVE where if appraisers use comps from the same neighborhood they are racist.

 

[shrubberyvaluation]

"On Wednesday night, the Economy League of Greater Philadelphia awarded $50,000 to Tankersly, Clara Lyons-DeVaughn, and Vonetta Hawkins to support their work to eliminate home appraisal bias, which happens when Black homeowners’ properties or properties in predominately Black neighborhoods are valued less than comparable properties owned by white households or in primarily white neighborhoods."

Like I assumed, you have to make sure you use so called "comparables" from a neighborhood with higher sales prices.

 

[George Hatch]

I'm curious what their technical competency is with SFR appraising. Starting with the fundamental point that nobody can book a profit or a loss until they expose the property to the market and come to terms with a buyer who is either well informed or advised. That occurs prior to any involvement of a lender or the appraiser that lender uses to make their loan decision.

Just because an appraiser says it's worth more or worth less than someone else's opinion doesn't mean the market participants will return that price after adequate exposure. Its the buyers and sellers who establish the price in the market, not the appraiser.

.

 

[Surf Cat]

That occurs prior to any involvement of a lender or the appraiser that lender uses to make their loan decision.

I asked AI the question based on your premise and here's what I got....

Home prices in minority neighborhoods are indeed influenced by market forces prior to an appraiser's engagement, but appraisers are deemed biased because they often rely on historically discriminatory practices and undervalue homes in these areas, perpetuating systemic inequities. The appraisal process typically uses comparable sales (comps) from nearby properties to determine a home’s value, but because of past policies like redlining—where federal agencies in the 1930s classified Black and minority neighborhoods as high-risk for lending—the baseline values in these areas were artificially suppressed. These lower valuations have persisted over generations, meaning that even if current market conditions suggest higher values, appraisers continue to use outdated comps that reflect historical discrimination rather than true market potential.

Studies show that homes in majority-Black and majority-Latino neighborhoods are systematically undervalued compared to similar homes in majority-white neighborhoods, even after controlling for structural and neighborhood characteristics. For example, a 2021 Freddie Mac study found that homes in majority-Black census tracts are significantly more likely to appraise for less than the contract price compared to those in majority-white tracts. Similarly, research indicates that homes in Black neighborhoods are valued at 23% less on average, amounting to a $48,000 per-home undervaluation and $156 billion in cumulative losses across U.S. cities.

This pattern suggests that appraisers, whether consciously or unconsciously, incorporate racial bias into their assessments by relying on a valuation system rooted in racial segregation and disinvestment. As a result, even when buyers offer market-rate prices, appraisals often fall short, not due to the home’s intrinsic value, but because the appraisal system reproduces past discrimination. This creates a feedback loop: lower appraisals lead to lower future comps, which in turn justify further undervaluation, reinforcing racial wealth gaps over time.

 

[George Hatch]

That's not anything but a regurgitation of the advocacy of the one side of the argument to the complete exclusion of the other side of the argument.

 

[Surf Cat]

That's not anything but a regurgitation of the advocacy of the one side of the argument to the complete exclusion of the other side of the argument.

I understand.....that's what AI primarily does.

The perception is out there though. Say something enough times and it becomes the truth. I feel that appraisers were never able to have our side of the argument heard. With the exception of appraisal sites and blogs that is. The previous administration had the largest microphone and media reach....

 

[Overimprovement]

Power brokers need a new definition of value then besides market value. Call it reparation value--what some people think their home should be worth even though they paid far less for it. But...don't we still need lenders willing to lend on reparation value?

 

[ZZGAMAZZ]

"On Wednesday night, the Economy League of Greater Philadelphia awarded $50,000 to Tankersly, Clara Lyons-DeVaughn, and Vonetta Hawkins to support their work to eliminate home appraisal bias, which happens when Black homeowners’ properties or properties in predominately Black neighborhoods are valued less than comparable properties owned by white households or in primarily white neighborhoods."

Like I assumed, you have to make sure you use so called "comparables" from a neighborhood with higher sales prices.

Call me Biased, but isn't the program biased, possibly illgeal, because it is targeting a specific racial audience, consequently excluding and denying similar assistance to other ethnicities?

 

[ZZGAMAZZ]

I asked AI the question based on your premise and here's what I got....

Home prices in minority neighborhoods are indeed influenced by market forces prior to an appraiser's engagement, but appraisers are deemed biased because they often rely on historically discriminatory practices and undervalue homes in these areas, perpetuating systemic inequities. The appraisal process typically uses comparable sales (comps) from nearby properties to determine a home’s value, but because of past policies like redlining—where federal agencies in the 1930s classified Black and minority neighborhoods as high-risk for lending—the baseline values in these areas were artificially suppressed. These lower valuations have persisted over generations, meaning that even if current market conditions suggest higher values, appraisers continue to use outdated comps that reflect historical discrimination rather than true market potential.

Studies show that homes in majority-Black and majority-Latino neighborhoods are systematically undervalued compared to similar homes in majority-white neighborhoods, even after controlling for structural and neighborhood characteristics. For example, a 2021 Freddie Mac study found that homes in majority-Black census tracts are significantly more likely to appraise for less than the contract price compared to those in majority-white tracts. Similarly, research indicates that homes in Black neighborhoods are valued at 23% less on average, amounting to a $48,000 per-home undervaluation and $156 billion in cumulative losses across U.S. cities.

This pattern suggests that appraisers, whether consciously or unconsciously, incorporate racial bias into their assessments by relying on a valuation system rooted in racial segregation and disinvestment. As a result, even when buyers offer market-rate prices, appraisals often fall short, not due to the home’s intrinsic value, but because the appraisal system reproduces past discrimination. This creates a feedback loop: lower appraisals lead to lower future comps, which in turn justify further undervaluation, reinforcing racial wealth gaps over time.

If based upon this type of analysis, bias is endemic and inherent in the process, would that factor not relieve practitioners from corresponding liabilty, and place blame on the system or those who are responsible continually to refine it to address irregularities including bias? [As an aside, I personally always try to complete the report and to save a dated version, before ever meeting the borrowers or visiting the subject property. It's very easy to do with an estimated margin of error of 10% - 20%, which doesn't address systemic neighborhood-based geo-bias, but it seems like it should diminish claims by borrowers based upon the appraiser's pre-conceived nation of th market value of real property owned by minority borrowers?????