Giving Compass' Take:
- Seanniece Bamiro highlights bias in the home appraisal process and what it means for the racial wealth gap.
- What role can you play in eliminating bias in key processes like home appraisal to reduce the wealth gap?
- Read about crumbling the racist structure of America's home appraisal industry.
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Last year, Drs. Nathan Connolly and Shani Mott, a Black couple from Baltimore, Maryland, sought out a home appraisal to refinance their mortgage, and their home was estimated at $472,00. Recognizing the valuation was out of line with homes in the area, the couple removed any traces of their race, including family photos and books by Black authors. The pair then outfitted the home with generic artwork, white family photos and asked a white colleague to pretend to own the home. After conducting this social experiment in racial bias, their second appraiser estimated the home value to be $750,000.
Drs. Connolly and Mott believe the initial appraisal process used subjective criteria to evaluate their home, including proximity to a majority-Black neighborhood and proximity to a busy street. The couple tried to challenge the appraisal with their initial lender but were met with silence.
On the other side of the country in San Francisco, California, another Black couple, Paul Austin and Tenisha Tate-Austin, sought out an appraiser to refinance their mortgage to pay for major upgrades. The initial appraiser valued the home at $995,000. What’s most shocking is that approximately a year earlier, the home was appraised for $1.45 million. Fortunately for the Austins, when they challenged their home appraisal, the lender agreed that the appraisal's subjective criteria were “incorrect or inappropriate.” Like Drs. Connolly and Mott, the Austins removed items hinting at their racial identity, including family photos and hair care products, and also asked a white friend to pose as the homeowner. The second appraiser valued their home at $1,482,500, higher than the previous two estimations.
Both scenarios illustrate the negative systemic conditions families of color often face during the homeownership process. These conditions contribute to our racial wealth divide. Whether a person is selling or buying their home, appealing a property tax assessment, applying for a home equity line of credit, or refinancing a loan, a home appraisal is necessary to ensure a home’s value is accurately assessed.
Home appraisals play a key role in setting a foundation for generational wealth, offering the homeowner access to the full equity when they pay off their mortgage.
Home appraisers are intended to give an “independent, objective, and unbiased opinion of the estimated market value of a residential property” based on home condition, size, amenities and upgrades, according to the U.S. Department of Housing and Urban Development (HUD). While home appraisals should be a race-neutral process at face value, racial bias is still alarmingly present in the home appraisal process, and these two stories are not anomalies.
A 2022 Fannie Mae study looked at 1.8 million appraisals for refinance applications in 2019-2020, and researchers found that white-owned homes were valued at higher rates in all neighborhoods but especially those in majority-Black neighborhoods. The researchers concluded that the overvaluation resulted in a 10 percent higher appraisal value in their automated valuation models.
Read the full article about racial bias in home appraisals by Seanniece Bamiro at Triple Pundit.