Home appraisers have recently gained unusual attention with an increase in the coverage of racial disparities in home ratings.
There is no simple explanation for how the value of a property is valued, but understanding how valuations work and the current makeup of the industry can provide a framework for addressing inequalities in the property market. lodging.
Why diversity matters in the evaluation industry
Before understanding why diversity matters in today’s valuations, it’s crucial to understand how the industry – and real estate more broadly – has been designed to disadvantage minority homebuyers for generations.
Jessica Brown is a graduate of the Appraisal Institute’s Appraisal Diversity initiative (ADI), which is a collaborative effort between Fannie Mae, the National Urban League, and the Appraisal Institute, and her goal is to diversify the ranks of assessors.
Brown is now an appraisal intern at Treffer Appraisal Group in Annapolis, Md., And a consultant at Area Probe, a national real estate consulting firm. But, before getting into real estate, Brown studied history and she told Bankrate that the policies of the past continue to affect the housing market today.
Many cities, she said, “have a history of redlining, which was a practice of the federal government that deliberately stated that those neighborhoods where blacks live are worth less than those where whites live.”
Brown said history has kept property values in minority neighborhoods low for generations because they were officially viewed as riskier investments. In addition to preventing families of color from increasing their wealth, this can put appraisers in a difficult position.
“Evaluators should use the data that is available to them, in most cases this is recently settled sales,” she said. “There is nothing an evaluator can do in practice to address this disparity.” But, she added, “understanding history would also encourage people to think about solutions that would address these types of institutional and historical problems.”
In the meantime, Brown said, valuations that seem unfair will continue to be a factor in his industry.
“Every month I see a viral article about a black homeowner who thinks they’ve been discriminated against by their appraiser and it erodes public trust,” she said. “If even a small population doesn’t trust ratings, that’s a huge problem for the industry and something they need to sort out.”
Industrial groups also subscribe to this point of view.
“The Assessment Institute recognizes that unconscious bias is human and exists in various forms, and that no profession is immune to it. We need to educate ourselves about potential biases and how to stop them, ”said Rodman Schley, president of the Appraisal Institute, in a statement in October. “Creating a more equitable housing environment is a top priority for the Evaluation Institute. “
How to become an evaluator
On paper, becoming an appraiser is not technically difficult. Although states can create their own more stringent requirements, national standards set by the Appraisal Foundation require an associate’s degree or a similar amount of relevant and accredited courses. Assessors must also pass state licensing exams and receive 1,000 hours of supervised training.
What is preventing the field from being more diverse?
It is this latter requirement, according to Brown, that is the real stumbling block for most potential reviewers.
“There is no bureaucracy preventing black people and other people of color from the industry. It’s more institutional in a sense, ”she said. “If we are talking about an apprentice style industry, it will be difficult for a black man to find someone to train him.”
For much of the 20th century, minorities were denied the right to become assessors or had extremely limited opportunities to break into the field. Now that these barriers have fallen by the wayside, the real struggle is to secure the necessary hours of supervised training.
According to 2019 Urban Institute data, 89% of home appraisers are white, making it much more unlikely that people of color will know someone who would be willing to spend the time necessary to mentor them.
“You have to know someone,” Brown said. “It’s a time commitment, and that’s why I think people can be reluctant to hire interns, and if they hire interns, they often make someone they already care about and for whom. they are ready to sacrifice themselves.
A new target assessment program for solutions
Since January 2021, the Valuation Foundation has introduced an alternative qualification method called Practical Applications of Real Estate Valuation (PAREA). Under the new framework, potential assessors can qualify for industry in states that accept their credits without needing such a high number of supervised hours. Much of the training in PAREA is done by simulation, although there is also a mentoring aspect. Individual states may choose to accept all, some, or none of a trainee’s PAREA hours.
Brown said she was optimistic that PAREA would help make becoming an appraiser an option for more people of color.
At the end of the line
The real estate appraisal field has long been dominated by white males, and real estate appraisals are built on a basis that consistently undervalues homes and land in minority neighborhoods.
Addressing these disparities will require concerted efforts, and initiatives such as ADI and PAREA are working in this direction.
“There’s a really big conversation where there’s a lot of emphasis on the industry reflecting what our nation looks like,” Brown said. “The public must have confidence that the reviewers are impartial. “
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