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Written by : Ryan Lundquist
Ryan Lundquist is a certified residential appraiser in the Sacramento area. Ryan runs the Sacramento Appraisal Blog, which is a top-ranking appraisal blog in the United States. He has been quoted in local and national publications and has been involved with the Sacramento Association of Realtors for nearly a decade. Ryan is also a board member of the Real Estate Appraisers Association of Sacramento. His clients include home owners, real estate agents, governmental agencies, attorneys, and lenders. Ryan also won the Affiliate of the Year award in 2014 from the Sacramento Association of Realtors.
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#1: in this day and age I have a hard time believing any Appraiser would willfully de-value a property because of race. period.
#2: every Appraiser likely knows the same situation when it comes to neighborhood boundaries. here in Grand Rapids I can travel a mere 5 blocks to go from 100,000 homes to 500,000+ homes. the racial makeup of the 2 areas is……black and white mostly. income levels differ significantly, as do….sorry…crime rates. If someone is stupid enough to rehab a home in an area of 100,000 homes, spending 200,000, making the home (if compared to 5 blocks away) a 500,000 home…..who has the income to buy it? when predominant values differ by 400,000 in a mere 5 block area….and school systems are significantly different…..why would an appraiser jump to the 500,000 area to value a home fixed up in the 100,000 area? to be nice? to be fair? Not me. I value my license too much.
All this talk…..about bias really bothers me. If an appraiser simply knows their market, knows the neighborhood involved, there would be and are no issues. The fact there are income divides in this country is obvious. As well as home values. That is hardly a racial issue is it? A person of any color who makes 35,000 a year can’t move up to the 500,000 neighborhood. If they want to….there are ways to make that happen. reality is reality. Appraising a home in the 100,000 neighborhood using 500,000 comps is irresponsible and any Appraiser who does so should lose their license. Despite their fear of being called a Rascist.
not gonna get into the whole bruhaha about systemic anything as it pertains to appraising. i do have a problem falling into the (realtor based) trap of using school districts when discussing property valuation. School district lines are FLUID! They are delineated by “school boards” (read “politicians”). As a result, they are almost always in flux and changeable.
The schools almost always reflect the neighborhood and NOT THE OTHER WAY AROUND!
This is a very good and timing article especially the part #4 on neighborhood and bias. I think all appraisals for mortgage purpose have the effect of proliferating bias because of the neighborhood boundary. The only way to get rid of racial bias is to outlaw the neighborhood boundary (which will overturned the appraisal theory taught in classrooms), and in time all neighborhoods will be in equilibrium.
Really? “neighborhood boundary” is not convenient for your political party but it has humongous consequences for market value if overturned.
I did not notice any “political party” commentary in either the article or any of the posts.
An appraisal is an opinion of value based on facts, right?
What are the facts facing the appraisal problem?
An appraisal report, but not the appraisal, may be tempered by assignment conditions: what limit is the client setting on selection of the sale comparables for the appraisal report?
If the client’s limitation prevents you from making a credible report, you violate USPAP.
Otherwise my reading of FNMA’s guidebook indicates an appraiser may include sales outside of the designated “neighborhood” if they are competitive to the subject.
When sale comparables are chosen outside the designated neighborhood, if warranted, what adjustment is the appraiser making for location? How does the appraiser defend those adjustments? Determine the amount? Does the appraiser base the adjustment on fact?
Both facts and the truth have no political agenda or bias.
Don’t forget that the definition of Neighborhood and Market Area are not necessarily the same.
Great point they are not the same… Additionally, let us also not forget the “bifurcated” neighborhood or market area
And this is when I lost interest reading this article. This author writes: “…there has been a history of systemic racism in real estate through redlining and restrictive racial covenants”. I disagree. This appraiser is following the same political rhetoric that is dividing our country even more. No objectivity, neither discernment to write such garbage.
Facts are hard to disagree with. The sentence you quote is a fact. Where do you think the term “redlining” came from? I can provide you copies of CC&Rs from all over the country that still show exclusion of people of various races and religions. The Fair Housing Act nullified them as non-enforceable, but they are still there. This article was very well written, there was noting divisive about it. You might give some consideration why you are having such a knee-jerk reaction to history.
If you have more than 30 years of real estate experience, you will remember Red Lining was an open secret in sales and lending. A fact in history.
Prior to the late 60’s, Non-White were not able (based on race alone) to buy a home in majority of the market (even in Hawaii). Another historic fact.
I thought this was a good documentary from PBS Independent Lens about the housing situation in American. I learned about some things I was struggling to understanding, being I live in a small town the Midwest and my work area is primarily rural.
https://www.pbs.org/video/owned-a-tale-of-two-americas-vlyf9h/
First, it’s important to point out that Fannie Mae’s neighborhood boundary guidelines are only guidelines. As the appraiser, you are the expert in your market, not Fannie Mae. More importantly, those are only guidelines for lenders to consider in evaluating the appraisal if the loan is to be sold to Fannie Mae not guidelines between Fannie Mae and the appraiser as Fannie Mae’s charter prohibits them from doing any business related to originating in the primary market. Next point is that all lenders have their own selling guides which may or may not align with Fannie Mae’s so learn if your broker, correspondent, or lender deliver mortgages to Fannie Mae and if not know the guidelines set in the selling guide for the secondary market lender, brokerage, etc. and always remember you are the expert in your neighborhood, not Fannie Mae or any other lender.
Now down to the root of the problem which is this not appraisal bias by actual licensed or certified appraisers as there are no published reports available through any regulatory agency supporting these allegations of intentional bias by appraisers. This problem stems solely from the ambiguities within Fannie Mae’s own policies and procedures for Collateral Underwriter and the Selling Guide. This so-called bias has only started gaining notoriety within the past 7 years coinciding with the period that CU was fully rolled out to all Fannie Mae approved lenders and their correspondent channels. So, where the selling guide states directional boundaries are to be used, it completely contradicts the redlining bias created as a result of CU defined markets at the Census Block Group and Census Block Level which whether intentional or unintentional by Fannie Mae’s CU creates the most serious infractions of racial bias within today’s mortgage markets.
Want to add. Saw the PBS story about Detroit. Prior to crash, given Carter/Clinton and even Bush 1, lenders were threatened to open up credit to everyone….even your cat! So homes sold for 100,000 in Detroit. A few years later they couldn’t sell for 20,000. Whose fault was that? Was it racial? was it racial when the lenders said we don’t care about your non existent credit??? I clearly remember those days and had a stack of faxes….yes faxes….on my floor a foot high from generally california Brokers (we know who they were) stating “I need this value”. I didn’t participate. Other Appraisers did. That was hardly racial bias. A lovely dirt poor white family moved in next me back then. 6 months into moving in the woman and I were talking from our back decks. She was crying. Her interest rate went up…they couldn’t afford the home. They had to sell. So dirt poor white, black, Hispanic….it didn’t matter. All were given the chance. And how many appraisers did appraise those homes at whatever the Lender wanted? This is as far from racial bias as greenland is from the Congo.
I don’t doubt redlining existed. Once. This was a Lender choice. What does that have to do with Appraisers?