• Thu. Dec 1st, 2022

Home appraisal industry continues to struggle with bias and lack of diversity

RALEIGH, NC (WTVD) — When LaToya Bogan went to refinance her home this fall, she was shocked at its appraised value.

“I was speechless. I had to read it, re-read it, and re-read it again,” the Willow Spring owner recalls.

The appraisal found Bogan’s home to be worth $25,000 more than when she bought it, but she said she thought that was a gross understatement. Bogan, who works in real estate, knew of other similar homes nearby that had been priced much higher.

“I tried to do my own research before it arrived, which is why I was shocked at how low it came,” Bogan said.

She was able to appeal and the second time the house was appraised at $75,000 more than its original value. The same evaluator used two different properties for the comparison the second time around.

Without the adjusted appraisal, Bogan would have been unable to refinance the home.

Bogan said she didn’t know why the first review was so low, but the increase in news about owners’ racial bias weighed on her.

“The value of my house doesn’t depend on the color of my skin,” said Bogan, who is black.

Bogan isn’t the only one wondering if her race had an impact on her rating.

The North Carolina Appraiser Board reported that it had begun receiving several bias-related complaints in recent years. The board told the ABC11 I-Team that it received eight bias complaints between October 2020 and June 2021; three have already been fired.

“Based on that and the intensification of discussions nationally, we have of course begun to follow up on this information,” the council’s deputy director said in an email calling the matter “great concern.” .

However, the Commission refused an interview on these complaints.

Stacey Anfindsen, an appraiser at the Triangle for decades, said he doesn’t believe race or ethnicity impacts an appraiser’s report.

“Reaction to bias is usually dismissed when people are unhappy with an opinion. And remember that a review is an opinion of value, and is credibly developed with decades-old techniques. “, explained Anfindsen.

Instead, he said it’s not unusual for discrepancies between valuations to occur and that several factors play a role in this.

“What we have struggled to do as a profession is to explain that an appraised value is not the same appraiser to appraiser or the same appraiser if the scope of work changes and the intended use changes. You may have a discrepancy in what that appraised value is,” Anfindsen said. He also admitted that the skill of the appraiser can affect value.

He said he believes a lack of understanding of how appraisers arrive at a value can cause some to jump to the conclusion of bias.

“We go in and we look at the house and we look at what has been done and what needs to be done. We look at the development, we look at the macro conditions around that development. We analyze supply and demand,” a- he explained.

However, in recent years, several homeowners have reported increasing the value of their homes after hiding their race. In Florida, a biracial couple hidden family photos and reported a $100,000 increase in the appraised value of their home on the second appraisal. Another California Family replaced their family photos with those of their white friends and reported a $500,000 increase in value.

Housing advocates are not pointing to individual incidents, but to historic policies that have devalued communities of color.

Nikitra Bailey, senior vice president of public policy at the National Fair Housing Alliance, said racial bias is often not a normal occurrence, but the industry faces systemic problems.

The National Fair Housing Alliance recently published a report funded by the federal government that pointed to serious biases in home appraisals and made recommendations to lawmakers and advocates.

“This type of activity is not a one-time thing and is not new. The reality is that Black families and other families of color have long faced exclusion in our housing finance system and due to this exclusion in the nation’s housing finance system. We’ve seen our neighborhoods constantly devalued,” Bailey explained.

She pointed a Brookings Institution study who estimated that the cost of undervaluing homes in black neighborhoods was about $156 billion in cumulative losses per year.

If ethnic minority homes are consistently undervalued, it affects the larger issue of the racial wealth gap. Homes are often the most important assets that families own and an important element in the creation of wealth. Lower value homes equal less wealth over time.

Research by Fannie Mae released last week found that half of the nation’s overpriced white homes in majority-black neighborhoods were in just six states; North Carolina was one of them.

“It was mostly because appraisers were selecting comparable homes outside of majority black neighborhoods when the home was owned by a white household. So even here in North Carolina, that’s a real problem,” Bailey said. .

Bailey explained that structural challenges within rating systems impact all owners.

One of the main recommendations was to ensure that evaluators are diverse.

ABC OTV’s data team analyzed US Census data which estimated that approximately 86% of raters in the country were white. In North Carolina, the diversity is even less. The ABC OTV Data Team’s analysis estimated that 95% of reviewers are white. Only 2% of appraisers are black while black residents make up 21% of the population, according to US Census Bureau estimates. Similarly, Hispanic appraisers represent 2% of the industry in the state and Asian appraisers only 0.5%.

“Some of the biggest issues are the barriers to entry into the profession itself. There are multiple levels of licensing and certification required by the profession, and those barriers really undermine the diversity of the profession,” Bailey said.

Anfindsen agreed that systematic change would be needed to diversify the profession, particularly in terms of how people join and get paid.

“I actually had a lot of conversations with people who took the pre-licensing courses, and I talked to them about the money, and you can just hear the disappointment,” he explained. “So we don’t really have a choice economically, but that’s sort of the stumbling block.”

Anfindsen explained that it costs about $3,500 to enter the profession and at least a year and a half to train. Then the annual costs can add up to around $6,500.

To begin addressing this issue, Bailey said historically black colleges and universities could begin programs and partnerships with assessors to create a pipeline to the profession.

“Increasing diversity within the profession means that people from diverse neighborhoods would actually participate in the assessment of communities and be able to draw strengths from the community based on their appreciation of the confusions of communities,” Bailey said. .

The report also recommended that industry standards clearly state that discrimination is prohibited, create fair housing training courses for assessors, and strengthen industry oversight, as well as better collaboration with advocates. civil and consumer rights.

“We want to make sure that we call on the industry to police themselves in many ways and we call on, you know, policy makers to make the necessary changes, it shouldn’t be the owner’s responsibility to protect themselves against a default valuation,” Bailey said.

For Bogan, who works in the industry, she remains passionate about making sure landlords are aware and fighting for their rights.

“As long as landlords become aware of their rights, we can fight back. You can also contact your state assessment board and file a complaint, but we shouldn’t have to come to that. So, I have the impression that if we hold appraisers accountable, then they will start to see that we know this market, we know our value, we know the value of our home,” Bogan said.

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