Appraisal Bias

During Black History Month, it's crucial to shed light on a pressing issue in the appraisal industry today: racial discrimination and appraisal bias. Appraisal bias, a problem affecting housing and home financing, occurs when an appraiser's assessment is swayed by factors beyond the property's value, like race, gender, or neighborhood.

This bias can result in undervaluing homes in communities of color while overvaluing properties in predominantly white areas. Often, these disparities stem from systemic racism in American real estate, including historical fair housing violations like blockbusting, steering, and redlining.

Blockbusting involves agents persuading homeowners to sell by claiming that individuals from protected classes are moving in. Steering occurs when agents guide buyers based on race, religion, or national origin. Redlining denies credit based on location, regardless of personal qualifications for loans. Although these practices are now illegal under the Fair Housing Act, their impact persists.

Recognizing appraisal bias is crucial. It can manifest as explicit (conscious racial considerations) or implicit (unconscious biases affecting valuations). Look for language in appraisal reports that hints at neighborhood demographics, racial stereotypes, or subjective descriptions that may indicate bias.

Fortunately, many states mandate appraisal bias training, and federal initiatives like the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) aim to investigate and counter discriminatory practices. If you suspect you're a victim of appraisal bias, reach out to HUD at (800) 669-9777 (voice) or (800) 927-9275 (TTY).