I’ll never forget the time in 2019 when my husband and I applied for a home equity line of credit (HELOC) for our home in Mountainside, New Jersey – an upper middle-class suburb about 45 minutes outside New York City.
To get a HELOC, our home had to first be appraised.
But when the appraiser came out, we knew almost immediately things weren’t going to go well.
The appraiser — an older White man — came to our door, gave my spouse and I the once over, and then kind of sped through the process of measuring, evaluating and photographing our 3-bedroom, 3-bathroom home, its full basement and pool area.
When we asked questions or offered information about upgrades and improvements we’d made, we were met with curt, dismissive replies.
So we weren’t that surprised, sadly, when the appraiser came back with a valuation of our home that was about $100,000 lower than the prices at which comparable houses in our neighborhood had recently sold – despite the fact that we’d just done a $40,000 kitchen renovation. As African-Americans, we knew it wasn’t atypical for homeowners like us to get lowballed when appraisers provided their opinions of real estate value.
Fast forward to early 2022, when the real estate market was on fire – right before it finally softened. We now live in an affluent suburb of Houston, Texas. Close friends in our community were likewise looking to get a HELOC on their 5-bedroom home in the first half of the year.
But when this couple, who is Hispanic, tried to give the appraiser (another 50-plus, White male) data on a nearly identical home right across the street from them that had just sold, the appraiser said: “Oh, you don’t want me to compare your house to that property.”
Their appraisal came back about $53,000 lower than similar homes that sold — plus the appraiser used older sales and more distant properties in his report.
In both cases, my husband and I, as well as our friends, appealed these lowball appraisals. And, in each instance, we all believe that we were – initially – the victims of racial discrimination by the appraisers.
Even in hot real estate markets, whenever homeowners are looking to sell, refinance or pull equity out of a house, there’s always one significant hurdle to be overcome in the property world: low real estate appraisals.
It’s a challenge for many, but the problem is especially acute in Black and brown communities and for homeowners who are people of color who often face bias and appraisal discrimination.
The issue: when appraisers come to assess the value of a home, 9 out of 10 times, the appraiser is White and they typically under-value homes in Black and Hispanic neighborhoods, or homes owned by African American and Latino homeowners.
Lowball appraisals sap untold billions of dollars of wealth out of Black communities and deprive owners and buyers of the chance to tap into or build home equity. Discriminatory, low appraisals can also cause deals to fall through, hurting both buyers and sellers. Furthermore, in the case of a home purchase, a low appraisal can force the buyer to come up with a bigger down payment, potentially putting the prospect of homeownership further out of reach.
These unfair, low appraisals are exacerbated by the fact that the Black homeownership rate in America already stands at just 45.3%, nearly 30 percentage points lower than the White homeownership rate of 74.6%, according to 2022 Census Bureau data.
The problem is so pervasive that some African-Americans, like this woman in Indianapolis, have resorted to concealing their race when an appraiser arrives — in order to get a fair appraisal.
This couple in California did the same thing, and got an appraisal that was about $500,000 higher when they had a white friend as the owner of their home.
Consider too the African-American Baltimore couple seeking to refinance their home in 2021. The appraiser said their house – which they’d paid $450,000 for in 2017 – was worth only $472,000, despite a surge in local housing prices. One of the homeowners, a professor of history at Johns Hopkins University and an expert on redlining, then had a White colleague come to his home and pretend to be the homeowner during a second appraisal. The new valuation: $750,000.
People shouldn’t have to resort to such tactics just because of their race or due to living in a predominantly Black or Hispanic area. But the issue of unfair, unjust and low appraisals is commonplace, and not just based on anecdotal evidence either.
Freddie Mac analyzed five years and 12 million purchase applications and found that appraisals in Black and Hispanic neighborhoods were far more likely to fall short of the contracted sales price, versus appraisals in White neighborhoods.
The appraisal industry itself has finally admitted it has a problem. In fact, the industry’s trade group, the Appraisal Institute, says they know the group must change, particularly by creating pathways for more diverse appraisers.
Currently, 78% of U.S. appraisers are male and more than 70% are over the age of 50. Among appraisers in America, more than 90% are White; 1.3% are Black and 4.3% are Hispanic, the Appraisal Institute reports.
The issue has even caught the attention of the Biden administration, which in 2021 created a high-level task force to study the problem. Called PAVE — for Property Appraisal and Valuation Equity — the task force in March 2022 released the PAVE Action Plan, which describes various steps federal agencies will take to advance equity in the appraisal process and “root out discrimination in the appraisal and homebuying process.”
Two of those steps include requiring appraisal anti-bias, fair housing and fair lending training for any appraiser doing appraisals for federal programs; and teaching homeowners how to spot the problem by incorporating appraisal bias info into first-time homebuyer education courses.
Home appraisals fall within the scope of fair housing and fair lending laws. Despite the passage of the Fair Housing Act in 1968 and subsequent amendments to ban various forms of housing discrimination (based on race, color, religion, national origin, sex, disability and family status), discrimination nonetheless looms large in the appraisal industry and across the housing market.
According to the PAVE Action Plan: “The data show that a pattern of racial disparity in appraised values exists and that the discrepancy cannot be fully explained by other factors.”
Given this reality, what should a Black or Brown homeowner do?
Here are 10 tips to defend your home’s value and what to do if you get a discriminatory, low appraisal because of your race or the community in which you live.
Tip #1. Get a CMA from a Realtor
A CMA is a Competitive Market Analysis that you can obtain free of charge from any local Realtor. It will give you a sense of pricing in your area because you will see the prices for homes currently on the market for sale, as well as recent sales that have closed.
Tip #2. Use digital real estate tools
Real estate apps and online tools like Zillow or Realtor.com can also be a quick way to get an idea of everything from home prices in a given neighborhood to how long homes are taking to sell.
Tip #3. Give appraisers data on relevant comps or recent sales data
It’s a good idea to hand the appraiser a list of recent sales in your area (you can use info from the CMA to help). That way, the appraiser knows that you know value ranges. Only provide data from very recent sales and properties nearby you, ideally within 1 mile or less from your home. That may not always be possible, but the idea is to use geographic proximity and similar properties as the basis for establishing expectations about the appraisal.
Tip #4. Be proactive in highlighting upgrades, improvements or extras
My husband and I now own 7 properties. Whenever we refinance any property or apply for any equity line or credit, we literally hand the appraiser a list of all substantive upgrades, renovations and property additions that should increase property value.
Tip #5. Request an appeal or reconsideration of valuation
If you get a low appraisal, ask your bank, credit union or other lender about the process to appeal the appraisal. Typically, you have to fill out a form stating facts (not opinions) about why the original appraisal was in error. For FHA loans, an appeal is called a “reconsideration” of value. If you appeal, you will likely have to pay for a second appraisal. However, it’s worth it to get an accurate and fair valuation.
Tip #6. Omit race on mortgage applications
Banks, credit unions and others ask for your race as an optional question on mortgage applications, but you don’t have to disclose this information.
Tip #7. Remove family photos from your home
The goal is to make your property as “race neutral” as possible to avoid potential bias. This is the approach my husband, Earl, and I took in 2019. After we appealed the ridiculously low appraisal we originally received, a second appraiser came. Surprisingly, he was a Black man.
We never said a word to him about what happened. But he seemed to inherently know what the issue was. He meticulously took photos, carefully measured our property, and then he offered some advice that stunned us: He told us to remove all the pictures of our Black family that were on the walls of our home.
My husband was so mad at the thought of doing this! It felt so unfair: Like erasure of our identity and a crazy way to resort to battling toxic racism. Earl initially thought about saying “No way” and kicking the appraiser out of our home.
Ultimately, he relented. Begrudgingly, we took the pictures down, and allowed the appraiser to photograph our “neutral” looking house. When the appraisal came back, it was $100,000 higher.
Tip #8 Consider having a “stand in”
Arrange for a third-party, specifically a White friend, colleague, neighbor or relative to be present at your home during an appraisal and to act as if they’re the homeowner. Again, it’s a pitiful option – but a way to combat unfair discrimination in home appraisals.
Tip #9 Pay attention to “gray areas”
These are places in an appraiser’s report where have a lot of leeway and subjectivity in their findings; everything from which properties they include to the Rating classifications used to the language about whether a home is fair, good, or excellent condition and so forth.
Tip #10. Double check the numbers
A crucial part of any home appraisal boils down to numbers: the number of bedrooms shown, the number of bathrooms, the number of rooms in the house, and especially the square footage. With our friends here in Texas, the appraiser short-changed them, and used a smaller number for the square footage than is actually in their home. So review those items to be sure your property isn’t being unfairly undercounted in some way.
Lastly, recognize that each one of these tips and options may not be viable or feel just right for everyone. And that’s OK. We all have to deal with racism and bias in the best way that we can – emotionally, personally and from a financial perspective too.
Whatever you do, know that you also have recourse with regard to reporting suspected appraisal discrimination. The Office of the Comptroller of the Currency regulates banks. Visit HelpWithMyBank.gov, an official OCC website, to file complaints. You can also report wrongdoing to the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov.