Allan Cohen

Going on 90 years ago, the federal government created maps of hundreds of cities redlining neighborhoods that were seen as too risky to lend in due to race or immigrant status. The effect of this practice carried forward for decades until finally outlawed by Congress in 1968. 

But the damage was done.  

Today, many of these neighborhoods house Black and immigrant populations that have been excluded from an aspect of the American dream – building wealth through equity. While home values in urban neighborhoods have increased, studies indicate they have not as rapidly nor as much as in white neighborhoods. 

Attention is now focused on identifying and eliminating practices that continue to devalue houses owned by people of color. What we have learned is there is no single cause, nor one single solution. One perspective is to lay blame on real estate agents who might steer buyers away from communities of color or convince sellers to list property at low prices. Or the mortgage industry, with its history of redlining, could be singled out.  

Stephen Sousa

Most recently, the spotlight came down on the role real estate appraisers might play in perpetuating undervaluation of homes in some neighborhoods or owned by people of color. The spotlight is nowhere brighter than in President Joe Biden’s campaign platform on housing, which commits to stopping the impact of racial bias in appraising. 

Industry Responds with Vigor 

This comes as a wake-up call to the appraisal profession. The Uniform Standards of Professional Appraisal Practice addresses bias in appraising, which most frequently has been looked at as an appraiser favoring one party in a transaction over another. Many appraisers assert they are dealing with facts and offering opinions of value supported by market data. 

Now, bias has taken on a new meaning that requires individual appraisers to look internally to identify those attributes of unconscious bias that influence how they perform their assignments. Could the selection of comparables, or the analysis of data or the neighborhood be viewed through a spectrum of bias? 

Professional organizations representing real estate appraisers have taken, and continue to take, steps to help their members and non-affiliated appraisers understand the subtle nature of unconscious bias. The recent New England Appraisers Expo, co-sponsored by the MBREA and the MA-RI Chapter of the Appraisal Institute, included a two-hour panel discussion on bias and its impact on society. A second presentation, sponsored by the MBREA, the American Society of Appraisers, the American Society of Farm Managers and Rural Appraisers, the Appraisal Institute and the National Society of Real Estate Appraisers drew a national audience of close to 1,400 appraisers. 

These same organizations are updating their codes of conduct to specifically address that members who employ bias based on many factors, including race, will be grounds for removal from the organization and loss of valuable designations.  

The MBREA recently adopted the following language into its Code of Conduct: “Members shall not base, either partially or completely, their analysis and/or opinion of market value on the basis of race, color, religion (creed), gender, gender expression, age, national origin (ancestry), disability, marital status, sexual orientation, familial status, employment status, or military status of either the present or prospective owners or occupants of the subject property, or of the present owners or occupants of the properties in the vicinity of the subject property, or on any other basis prohibited by law.” 

Most Biases Are Subtle 

What about data and facts? Shouldn’t they be the determinant of the value of a house? How can an appraiser avoid losing even a tiny bit of objectivity on an assignment? 

Our first question is, how familiar is the appraiser with the neighborhood and community where the property is located? For example, an appraiser who rarely works in an urban neighborhood might approach an assignment with a bias against older houses that are close together and intermixed with a variety of commercial uses. We believe geographic competency is a must. 

Instances of overt bias, such as purposely undervaluing a house in a white neighborhood owned by a Black, are easily identifiable and should be investigated by licensing authorities who are equipped to appropriately discipline the appraiser. 

We do not believe there is rampant, overt bias inculcated within the appraisal profession. Society is awakening to damage emanating from years of allowing bias to influence behavior and is working at righting centuries of wrongs. Likewise, individual appraisers have an obligation to recognize and resolve their own unconscious biases when performing assignments, a process the MBREA and other appraisal associations will help facilitate. 

Allan Cohen is a certified general appraiser who chairs the MBREA’s government affairs committee and serves as a trustee of the association. Stephen Sousa is executive vice president of the MBREA, a Bostonbased professional association serving real estate appraisers in Massachusetts and New England. 

Appraisers Face Wake-Up Call on Race

by Banker & Tradesman time to read: 3 min