Teaching Appraisers to be Biased?

[alebrewer]

Did those boomer babies have more opportunities to generate wealth during their lifetime? Yep. The makeup of housing markets is evidence of that, but it is not responsible for it. Stock market wealth is also heavily tilted toward older whites.

To make sure I'm understanding: are you saying homeownership wealth is NOT responsible for at least some (if not most) of the wealth gap? It's an extremely complex issue involving many facets. For instance, the homeownership rate gap between whites and blacks is ~ 40%. Is that attributable to past structural discrimination? I believe so, but WHICH actions in particular are responsible? Unequal access to education? Unequal access to higher paying positions? The fact that there is an inherent wealth gap - in addition to - and separate from - the home equity gap? I'm not arguing for modification of any of the approaches to value. I'm stating as a fact that current homeownership rates are influenced by past discriminatory actions and the current home equity wealth gap is influenced by past discriminatory actions. I'm also arguing for meaningful actions that attempt to bridge those gaps. IMO, that does not involve creating a new approach to value or modifying existing approaches. It involves changing market participants' perception(s) of those blighted areas. Instead of $50k 1st time homeowner grants, let's create more green space in blighted areas. Let's increase the quality of schools in those areas. Let's incentivize business owners - small and large - to do business in those areas. That's what generates property wealth.

Of course - to GH's point - one unintended consequence of bridging that gap is that you'll now displace many of the folks you were trying to assist.

It's just a terribly complicated issue, but reparations - however you want to dress them up - are not a viable long term solution.

 

[shrubberyvaluation]

To make sure I'm understanding: are you saying homeownership wealth is NOT responsible for at least some (if not most) of the wealth gap? It's an extremely complex issue involving many facets. For instance, the homeownership rate gap between whites and blacks is ~ 40%. Is that attributable to past structural discrimination? I believe so, but WHICH actions in particular are responsible? Unequal access to education? Unequal access to higher paying positions? The fact that there is an inherent wealth gap - in addition to - and separate from - the home equity gap? I'm not arguing for modification of any of the approaches to value. I'm stating as a fact that current homeownership rates are influenced by past discriminatory actions and the current home equity wealth gap is influenced by past discriminatory actions. I'm also arguing for meaningful actions that attempt to bridge those gaps. IMO, that does not involve creating a new approach to value or modifying existing approaches. It involves changing market participants' perception(s) of those blighted areas. Instead of $50k 1st time homeowner grants, let's create more green space in blighted areas. Let's increase the quality of schools in those areas. Let's incentivize business owners - small and large - to do business in those areas. That's what generates property wealth.

Of course - to GH's point - one unintended consequence of bridging that gap is that you'll now displace many of the folks you were trying to assist.

It's just a terribly complicated issue, but reparations - however you want to dress them up - are not a viable long term solution.

I will add culture too, which can be a result of past discrimination also I suppose.

The thing is they don't care about fixing those issues of schooling, just the opposite, especially in the Democrat party.

Instead they have their scapegoats, and we are one of them. Why arn't appraisers working to fix past wrongs they will say, c'mon just hit that bullseye.

 

[George Hatch]

If the politicians want to enable or compel lenders to increase their LTVs above MV there's no appraiser who has any (non-political) reason to object to that. I don't care what the lenders do or what happens to them if they engage in 125% LTVs as an entitlement to certain groups. It's none of my business how those decisions are made or how they play out IRL.

I don't see appraisers getting emotionally worked up over the entitlement aspects of the VA underwriting for the SFRs or Section 8 rents with the multi-family. Nobody cares. The same apathy would logically apply to any parallel application.

What I do object to is coercing the appraisers to cross the line into client advocacy in order to amplify - on the undisclosed basis - the discretion being used in these transactions. I don't want to get involved with client advocacy. If they are required or desirous of providing the benefit then I want the responsibility for that discretion to be fairly and accurately attributed to the people making those decisions , and not obscured from view by pressuring the appraisers to say one thing (impartial) vs doing another (advocate for).

Matter of fact, I wouldn't mind one little bit if the definition of MV being used was swapped out and replaced with (or supplemented with) a different definition which speaks to equitable instead of equal. You do you, Ms Activist. You ask the question and I'll do my best to answer it in good faith. And competency.

As for the self-proclaimed intellectual aristocracy among the activist set, your problem isn't actually with the SCA or with the principle of substitution. Your problem is with the definition of value itself which is being used in those appraisals. The most direct and honest solution for your ends-justifies-the-means goals lies in actually moving that goalpost from fair/equal to entitled/equitable. If you knew what your were talking about with appraisals you would have figured this out a long time ago.

Every mortgage lending appraisal *could* include 2 value conclusions, complete with 2 separate definitions of value used therein:
Market Value = $zzz
Equitable Value = $yyy

After that, let the users figure out what they want to do. Once our job is done we have no reason to care about how they proceed.

 

[Terrel L. Shields]

They speak of affordable housing in one sentence, and then having higher property values in the next,

too true

let's create more green space in blighted areas. Let's increase the quality of schools in those areas. Let's incentivize business owners - small and large - to do business in those areas. That's what generates property wealth.

The same applies to so-called "climate crisis". There is no crisis in climate. There is a crisis in common sense. Do we expend the trillions we are told must be spent on high tech solutions to "CO2" and greenhouse gases... things like cutting CO2 emissions and dusting the upper atmosphere with sun blocking particles ... untried technology with potential unintended consequences? Or do we spend that money on better education, medications, & vaccination of poor people in Africa, Asia, and S. America? That we know will enrich the lives of those living there, it will also mean they no longer will have a need to produce large families and ultimately every country that improves its health and welfare also reduces its birth rate. And at the rate we are going, we are on track to stabilize the human population well before the end of the century. We know what education and better medicine does to societies. We have no idea if sprinkling fairy dust into the atmosphere works, or if we know how much such dust will be required to stabilize a climate that has always been variable.

I will add culture too

As the "Black Avenger", Ken Hamblin, a retired columnist and writer said, "races do not clash, cultures clash."

 

[CGinMN]

To make sure I'm understanding: are you saying homeownership wealth is NOT responsible for at least some (if not most) of the wealth gap?

I am mostly responding to the statement that, "Past discriminatory actions ARE still impacting current valuations." As I see it, wealth creation is the result of opportunity. Wealth creation in the US happens to be closely tied to homeownership and equity gains, because these are that is typically espoused as the best investment one can make. Anyone can take their opportunity and wages and invest them elsewhere, such as the stock market. So, to me, it would make more sense to say that housing markets are evidence of wealth, but not the responsible for it. Opportunity is responsible, and there is definitely an opportunity gap. Wealth creates opportunity, so there is a feedback mechanism involved, but home equity isn't an essential component.

 

[The Bob]

I am mostly responding to the statement that, "Past discriminatory actions ARE still impacting current valuations." As I see it, wealth creation is the result of opportunity. Wealth creation in the US happens to be closely tied to homeownership and equity gains, because these are that is typically espoused as the best investment one can make. Anyone can take their opportunity and wages and invest them elsewhere, such as the stock market. So, to me, it would make more sense to say that housing markets are evidence of wealth, but not the responsible for it. Opportunity is responsible, and there is definitely an opportunity gap. Wealth creates opportunity, so there is a feedback mechanism involved, but home equity isn't an essential component.

Agree. I would add that thrift and taking advantage of economic opportunities are equally important in building wealth. Of course older people will always have more wealth, its the logical result of asset values compounding over time.

 

[alebrewer]

We know what education and better medicine does to societies. We have no idea if sprinkling fairy dust into the atmosphere works, or if we know how much such dust will be required to stabilize a climate that has always been variable.

Exactly. We know what works, and it's not making up artificial estimates of property value so that everything looks equitable 'on paper'. The only meaningful - long term - solution is to engage those activities that create relatively higher demand - areas with small business, green space, good schools, reliable medical care, etc. And those things don't happen overnight.

It's like the evolving attitudes toward women. A century ago, women had just received the right to vote. Culture change takes time. You can't fix centuries of wrongs in a decade. It takes time for folks to embrace new culture.

 

[alebrewer]

I am mostly responding to the statement that, "Past discriminatory actions ARE still impacting current valuations." As I see it, wealth creation is the result of opportunity. Wealth creation in the US happens to be closely tied to homeownership and equity gains, because these are that is typically espoused as the best investment one can make. Anyone can take their opportunity and wages and invest them elsewhere, such as the stock market. So, to me, it would make more sense to say that housing markets are evidence of wealth, but not the responsible for it. Opportunity is responsible, and there is definitely an opportunity gap. Wealth creates opportunity, so there is a feedback mechanism involved, but home equity isn't an essential component.

I like it. I disagree, but I like it nonetheless. I believe the initial redlining practices created a wealth gap that has persisted - and been exacerbated - to this day. I do not disagree, however, that opportunity gap is also responsible. I further agree that it is all circular.

 

[CGinMN]

I believe business owners should vet the businesses with whom they do business. Personally, if I knew a client was doing predatory 125% LTVs, I would object, not as a matter of politics, but as a matter of ethics.

 

[George Hatch]

I understand the safe/sound lending and the moral hazard arguments, but the morality or even reasonableness of "what's the (MV or EV) value?" isn't actually an appraiser ethics issue, per se. We never get emotionally involved when the use of an appraisal is for eminent domain and they're going for the "The highest price ..." instead of "The most probable price...". The question being asked is aimed at the decision they're trying to make.

Why would working on an assignment that was to be used for a 125% or 140% LTV mortgage be unethical if that program was tolerated or enabled or encouraged or required by the govt? If this is the direction our society has chosen to move then who are we to say it's professionally unethical to answer the questions which are actually being asked?

Now if a lender IS engaged in unlawful or prohibited or underhanded conduct then of course it makes sense for an appraiser to be mindful of the company they keep. I'm just speculating on the appropriate course of action for appraisers if/when our society and our govt decides to go in a different direction. IRL there are segments in our society who want to move to their version of utopia, and they do vote.