Many of you reading this are probably familiar with this case which recently went viral. A husband and wife have requested a bank appraisal to refinance their home in Jacksonville, Florida. The woman is African American and her husband is white. Only the wife was at home to greet the assessor when they arrived to inspect her home. When the couple received their final home valuation report, they were shocked! The couple couldn’t believe their home was valued so low, and they immediately felt that the woman’s race played a role in the outcome. After getting over the initial shock and anger, the couple requested a reassessment of their home. However, when the new assessor arrived at their home, only the white husband was there to greet the assessor; In addition, the couple had removed family photos and all other evidence that an African American was residing at the residence. The second appraisal showed a $ 100,000 increase in the value of their home over the first appraisal report.
Further reasoning might suggest that there might be other explanations for the $ 100,000 discrepancy between the two appraisal reports, explanations that have nothing to do with the wife’s race. The first appraiser could have been incompetent, resulting in a lower value estimate for the couple’s property. The second appraiser could also have been incompetent, leading to an overvaluation of the couple’s assets. The first evaluation report could indeed have been precise, and the owner’s opinion on the value of his house could have been aggressive. These are all potentially logical conclusions; however, logic doesn’t go viral, doesn’t move people – emotions do. Let’s unpack this situation …
Beyond the Headlines: Residential Assessment Exam
The real estate appraisal industry has a system to deal with situations where the appraised value of a home is in dispute; it’s called the review process. In this process, disputed assessment reports are reviewed by an experienced review assessor, often supervised by an assessment manager. Evaluators who complete reports do so knowing that their work could and would have be considered if an owner, as in this case, accuses the appraiser of having racial bias in his estimate of value. This standard review process inherently reduces the likelihood that a intentional bias will have a significant impact on the value of evaluation reports.
However, the husband and wife in this article are not assessment professionals. They are not aware of or concerned with the nuances of the aforementioned review process; these are owners who have retained the services of a financial institution. To add to the emotional angst, the African American wife of an interracial couple felt that it was because of his race that the estimate of the value of their house was so low. By requesting a second appraisal report, removing race from the equation, and subsequently receiving a higher valuation estimate for their home, in his mind, the suspicion of the wife has been validated. If the reasoning could introduce alternative explanations (other than race) for the couple’s home to be valued significantly lower than the owner’s expectations, why did the woman immediately indicate that her race was the culprit? ? The answerâ¦
First of all, a bit of history. The term âredliningâ comes from the New Deal’s development by the federal government of maps of each major metropolitan area in the country. These cards were first color coded by the Homeowners Loan Corp, then by the Federal Housing Administration (FHA), and adopted by the Veterans Administration. These color codes were designed to indicate where it was safe to insure mortgages. Wherever African Americans lived or lived nearby, were colored red to indicate that these neighborhoods were too risky to insure mortgages.1
At that time, appraisers used comments about breed that had a direct impact on home valuation estimates. Comments made by reviewers such as “Colorful infiltration has a markedly negative influence on neighborhood desirability,Were common practice at the time. The FHA handbook of that time also detailed segregationist policies stating that “incompatible racial groups should not be allowed to live in the same communities.”1 These policies allowed white families to take advantage of federally subsidized housing in newly built suburbs with a government insured mortgage, and African American families were systematically excluded. The inability to create wealth through home equity has been the main contributor to the wealth gap in our country, with African-American wealth accounting for around 5% of white wealth (compared to an income gap of 60%).1
So, an African-American homeowner, who has an interracial relationship with a white man, has his house appraised by a (supposed) white appraiser and receives a much lower appraisal than expected. To expand the context further, we know that she is an educated lawyer (who undoubtedly knows her story) and has lived her life in America as a black woman. As we Contemplating the history of discrimination against African Americans, such as redlining, etc., it becomes very clear why the owner would instantly assume that his race was factored into the estimate of his house’s lowered appraisal value. But, what else played a role?
Given that the race of the reviewer in the article was assumed and not specifically mentioned, what is the likelihood that the reviewer in the article is black? How likely are reviewers or review managers, if called upon to intervene in the value conflict, to be black? To examine these questions, I am going to have to tell you a little about my experience and my perception throughout my journey in the real estate appraisal industry.
I am an African American male with an MBA specializing in real estate and urban affairs. I am also a licensed residential appraiser. My first real estate job as a staff appraiser was at a company that was a forerunner to today’s appraisal management company. The company employed twelve residential appraisers. I was the only African-American reviewer.
I have been tasked with appraising properties in predominantly black areas of Atlanta, Georgia. When I showed up to an owner, the first reaction was the joyful shock that a black appraiser was appraising their house. For most of these black homeowners, I was the first African American real estate appraiser they had ever met, and they told me. What I also remember from those conversations and interactions with these black owners is the relief expressed on their faces, the pride felt in their voices, these unspoken, silently felt the assurance that they felt that they would be treated fairly in this process.
In my next job as a staff assessor, I worked for a large financial institution, first as a staff and senior staff review assessor, and then as a guarantee services manager. While at this financial institution, all of the bank’s valuation managers were scheduled to attend a meeting in Seattle, WA. As we gathered I looked around, hoping to glance at someone, anybody who looked like me. As I mingled and observed it, the “one” syndrome was reflected here as well. I was the only African American valuation manager across the country for this large financial institution. But why?
Diversity hampered by industry structure
The structure of the real estate appraisal sector is an obstacle to the creation the equality of chances for the diversity in its ranks. To obtain a residential appraisal license, in addition to meeting training requirements, etc., a trainee appraiser must be mentored and trained by an experienced, licensed or certified real estate appraiser. The real estate appraisal industry is fragmented, dominated by relatively small home appraisal companies. The fragmented nature of the industry is what has given rise to appraisal management companies that function as âmanagement intermediariesâ between residential appraisers and financial institutions in need of appraisal services.
Most fee assessor shops are relatively small, owned by white people, and generally train people known to business owners in some respect. As these large financial institutions seek to employ appraisers, appraisers and appraisal managers internally, they look within their company, which usually reflects the lack of diversity in the market. Alternatively, they can look directly to the market to meet their hiring needs, which serves large financial institutions to a mix of potential employees who are devoid of diversity. This market structure ensures that a lack of diversity when it comes to African American staff assessors, exam assessors, and assessment managers is the norm because the structure hinders or limits equal opportunities for various assessment trainees to enter the field and move on to other jobs such as staff assessors, exam assessors and assessment managers.
The story associated with the interracial couple has been featured in print and digital newspapers, blogs, and articles across the country. It was also posted on social media where it went viral, seen by millions of people. The reputation of financial institutions involved in these types of situations can be adversely affected, not necessarily by the logic or facts associated with such cases, but by people’s emotions – the way people to feel when things go wrong. And often people feel this because they never see someone like them providing these services to them.. History, perception and the lack of diversity in today’s environment are at the root of this feeling. No amount of logic will change that.
I remember something Lester Owens said at a town hall. He said, âOnce you understand that there is a problem, you can always fix it. Well, there is a problem.
1. NPR – A “forgotten story” of how the US government separated America
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