This article was originally published in the Fall 2021 Appraisal Buzz Magazine here.
As a black appraiser responsible for collateral risk at a mortgage bank, racial bias in appraising claws at me from every direction. There are many biases that can be interjected into an appraisal – racial bias is just one of them and here is my experience. The complexities of the topic have me concerned in overlapping and contradictory ways. As a result, I do not have the privilege of pledging complete allegiance on any front.
BIAS HITS CLOSE TO HOME
Nine years ago, my parents had their home appraised for a refinance transaction. As an appraiser, I knew the value came in low, so I asked to submit a reconsideration of value. The appraiser agreed with my viewpoint and increased his opinion of value by $100,000. At the time, I was neither surprised nor particularly frustrated by this exercise. I couldn’t say for sure why the appraiser made a series of mistakes culminating in a $100,000 error, but events of this type weren’t happening in a vacuum. It linked to what the movers said about my parents; they must have hit the lotto to afford their house. It linked to my sister’s classmates on the first day of school, when they tried to steer her away from bus #14 and towards bus #6 because that was the “ghetto” bus. It linked to my brother being the only black student in his class and the only black student in his grade. The house, the movers, the school district – it was all connected.
THEN VERSUS NOW
Nine years ago, my family prided itself on the proficiency with which we navigated being black. The $100,000 reclamation of value was further proof that we knew how to manage the financial risks associated with our skin. However, not all black homeowners feel this way. I no longer feel this way. The workarounds that were once a symbol of our ingenuity, such as redacting ourselves (removing family photos and black art) from our home, are now just plain exhausting. Then, trying to explain the necessity of ingenuity to those brand new to this conversation is exasperating. Exhausted and exasperated black homeowners across the country are no longer redacting and are done explaining. Instead, they are going to the media. The black person in me gets it. The lender in me is bracing for impact.
THE HOMEOWNER’S WOUNDED PRIDE
When a homeowner is disappointed in the appraised value, they’ll grasp at anything to diminish the appraiser’s credibility. I have seen complaints about the appraiser’s attire, complaints about the appraiser’s car, and complaints about the appraiser’s failure to see the sex appeal of the home. When you challenge an appraisal on the grounds of sexiness, that argument stems from wounded pride. Telling someone their home is worth less than they thought is hurtful, and a wounded homeowner will say things not based in fact. Bias exists, but as a lender, it is worrisome that homeowners have been empowered with a new way to stave off the disappointment of a low valuation. I fear claims of racial bias will become the new way to shop for value.
TRYING TO MAKE SENSE OF IT ALL
The perfect breeding ground for speculation is a lack of information. In its absence, people will fill in the blanks with the narrative that makes the most sense. Racial bias is a narrative that makes sense to many black homeowners. However, racial bias is also the narrative of last resort. It is subtle, subjective, and hard to pinpoint. The amorphous nature of complaints of this type is not lost on the black community. There is always a preference for facts and figures. Only when the facts and figures don’t add up are alternative explanations considered. If, as lenders, we give borrowers more information, we can crowd out speculation and empower borrowers to communicate their valuation concerns more effectively.
RECONSIDERATIONS OF VALUE
I have to imagine that, for the homeowner, reconsiderations of value are opaque. The success or failure of their disputes may seem whimsical, unjust, or racially motivated. Suppose a lender agrees with the appraiser without first explaining how they came to this agreement. In that case, the lender can be perceived as racially biased – transparency around decision-making protects the lender from the appearance of taking sides. The more the borrower can predict what conclusions their lender will come to, the less personal the process becomes. Predictability demonstrates consistent and equitable application of the rules. Ultimately, that is all black borrowers want.
RISK VERSUS REWARD
There is an emotional tax associated with the very thought of discrimination. The perception of being mistreated has a lingering negative effect, which means the management of bias claims does not end with the acceptance or rejection of the appraisal. The resolution of the appraisal may only get the lender back to neutral with their borrower. If the goal is to have the borrower transact again, lenders need to demonstrate an understanding of the experience’s impact. A conflict that ends in a powerful resolution creates loyalty. There is an opportunity in this. Black borrowers can become raving fans. If racial bias has already exposed lenders to risk, let us not miss out on the possibilities of the reward.