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Black Homeowners Face Discrimination in Appraisals (2020)

18 points by maxwell 5y ago

deleted 5y ago
[deleted]
mycologos 5y ago
Is there data for how much appraisals on a single house vary across appraisers, in general? The process seems pretty ... unrigorous. EDIT: Here's another NYT article complaining about appraisals [1] and attributing a 50% increase in appraised price to the presence of blooming flowers in a formerly dormant garden. There's also a very long thread about this topic at "AppraisersForum" [2]. It's an interesting thread if you're curious about reactions from appraisers themselves, though it seems to have sort of a Fox News tilt. [1] https://www.nytimes.com/2011/09/17/your-money/decoding-the-wide-variations-in-house-appraisals.html https://www.nytimes.com/2011/09/17/your-money/decoding-the-w... [2] https://appraisersforum.com/forums/threads/allegations-of-appraiser-racism.228440/ https://appraisersforum.com/forums/threads/allegations-of-ap...
MeinBlutIstBlau 5y ago
I have worked as a mortgage processor for residential homes and as a commercial mortgage processor for about three years in a past life. And to be frank, the first paragraph reads as an entitled person who thought they're home was valued at more than it was when it really wasn't. Appraisers need comparable properties. They CANNOT choose houses in the same area unless they cannot get comparable properties within a certain vicinity. Appraisers have laws they need to follow too. Appraisers can also revise it if the person who paid for the appraisal can provide comparable houses sold and their price. This is the major kicker. Most people just assume "Oh well that house lives near me so my house must be worth as much!" No, it needs to match things like square footage, number of rooms, history of sales, the community at large, and whatever else that appraiser likes to do. Funnily enough, something they could've done to test if it was racist is to have a separate appraiser do the appraisal but give them the previous appraisal without the dollar amount quoted. Then give another one with the dollar amount. I guarantee you they will more or less come in at or around the same price. From someone who was in the inside (and had numerous minorities get loans and appraisals), this just looks like NIMBY pissed they over inflated the value of their house just because they changed linoleum with tile and removed the wallpaper. Appraisers don't even know your race until they walk in your house 99/100. They communicate almost exclusively with the financial and not you. And due to Truth In Lending since 2008, the likelihood that you can prove discrimination and racism in the banking industry is borderline impossible. That's why it takes so damn long to get a mortgage and you have to wait 3 days between signing the final documents.
- jjeaff 5y ago
  I don't know, if you have worked in mortgage processing, you know that appraisals are as much a science as an art. Many appraisers that work for banks have the uncanny ability to appraise just high enough to get the loan (within reason, of course). There is a lot of wiggle room for appraisals. And if an appraiser is very motivated and willing to put in some extra time and effort looking for comps and finding reasons to increase, decrease based on other details, they can affect the appraisal greatly. I wouldn't rule out the possibility that an appraiser, even sub-consciously might not put in quite as much effort once they see that the owner doesn't quite look like them. I wouldn't expect that the make huge differences, but i can imagine it having an aggregate effect of statistical significance.
  - MeinBlutIstBlau 5y ago
    >Many appraisers that work for banks have the uncanny ability to appraise just high enough to get the loan (within reason, of course). Yes however Appraisers cannot work for the bank. They can be part of a separate company "owned" by the corporation, but they cannot work directly under the lending institution. Hence why 2008's crash happened. Also with a purchase, appraisers basically know loans need to come in at a minimum of 80% Loan to Value (LTV) ratio so they just take the purchase price and divide it by 80% to get the value needed so the loan can be funded and to speed things up. Although it doesn't matter to appraisers because they get paid either way. A lot of appraisals today are ordered through a third party that contracts out the appraisal bidding for banks because it absolves the financial from having a bias. >There is a lot of wiggle room for appraisals. Not once it's said and done. The appraisers cannot just change things in the appraisal cause the borrower complained. The borrowers can come back with comps or disprove inaccurate information such as incorrect sq footage and the appraiser can readjust it if they deem it necessary. They're on the line when an audit comes around and they're risking their license each time they do it, that's why they rarely ever change it unless the borrower is definitely right (which they rarely are, but it happens). > And if an appraiser is very motivated and willing to put in some extra time and effort looking for comps and finding reasons to increase, decrease based on other details, they can affect the appraisal greatly. They most definitely are not. They have no incentive to work harder on one appraisal over another aside from retaining repeat business if it's not ordered through the third party appraisal company. Financials try not to go with the same appraiser for all appraisals because then it looks as though we are the sole employer of an appraiser and therefore can become a serious audit issue. Auditors will look at everything, even some stupid doc that wasn't supposed to be in a file and write up the institution for it. >I wouldn't expect that the make huge differences, but i can imagine it having an aggregate effect of statistical significance. You are overinflating their power by a lot. Appraisers have far less influence on the loan process than the lenders do. The simple fact that there are for profit lending institutions that can charge single digit percentage fees on 6 figure loans or allow for 0-3% down just shows were heading for 2008 again. Except the only difference is investors know when they're buying risking mortgage securities as opposed to not knowing if all of them are good or bad.

18 points by maxwell 5y ago

deleted 5y ago

[deleted]

Is there data for how much appraisals on a single house vary across appraisers, in general? The process seems pretty ... unrigorous. EDIT: Here's another NYT article complaining about appraisals [1] and attributing a 50% increase in appraised price to the presence of blooming flowers in a formerly dormant garden. There's also a very long thread about this topic at "AppraisersForum" [2]. It's an interesting thread if you're curious about reactions from appraisers themselves, though it seems to have sort of a Fox News tilt. [1] https://www.nytimes.com/2011/09/17/your-money/decoding-the-wide-variations-in-house-appraisals.html https://www.nytimes.com/2011/09/17/your-money/decoding-the-w... [2] https://appraisersforum.com/forums/threads/allegations-of-appraiser-racism.228440/ https://appraisersforum.com/forums/threads/allegations-of-ap...

MeinBlutIstBlau 5y ago

I have worked as a mortgage processor for residential homes and as a commercial mortgage processor for about three years in a past life. And to be frank, the first paragraph reads as an entitled person who thought they're home was valued at more than it was when it really wasn't. Appraisers need comparable properties. They CANNOT choose houses in the same area unless they cannot get comparable properties within a certain vicinity. Appraisers have laws they need to follow too. Appraisers can also revise it if the person who paid for the appraisal can provide comparable houses sold and their price. This is the major kicker. Most people just assume "Oh well that house lives near me so my house must be worth as much!" No, it needs to match things like square footage, number of rooms, history of sales, the community at large, and whatever else that appraiser likes to do. Funnily enough, something they could've done to test if it was racist is to have a separate appraiser do the appraisal but give them the previous appraisal without the dollar amount quoted. Then give another one with the dollar amount. I guarantee you they will more or less come in at or around the same price. From someone who was in the inside (and had numerous minorities get loans and appraisals), this just looks like NIMBY pissed they over inflated the value of their house just because they changed linoleum with tile and removed the wallpaper. Appraisers don't even know your race until they walk in your house 99/100. They communicate almost exclusively with the financial and not you. And due to Truth In Lending since 2008, the likelihood that you can prove discrimination and racism in the banking industry is borderline impossible. That's why it takes so damn long to get a mortgage and you have to wait 3 days between signing the final documents.

jjeaff 5y ago
I don't know, if you have worked in mortgage processing, you know that appraisals are as much a science as an art. Many appraisers that work for banks have the uncanny ability to appraise just high enough to get the loan (within reason, of course). There is a lot of wiggle room for appraisals. And if an appraiser is very motivated and willing to put in some extra time and effort looking for comps and finding reasons to increase, decrease based on other details, they can affect the appraisal greatly. I wouldn't rule out the possibility that an appraiser, even sub-consciously might not put in quite as much effort once they see that the owner doesn't quite look like them. I wouldn't expect that the make huge differences, but i can imagine it having an aggregate effect of statistical significance.
- MeinBlutIstBlau 5y ago
  >Many appraisers that work for banks have the uncanny ability to appraise just high enough to get the loan (within reason, of course). Yes however Appraisers cannot work for the bank. They can be part of a separate company "owned" by the corporation, but they cannot work directly under the lending institution. Hence why 2008's crash happened. Also with a purchase, appraisers basically know loans need to come in at a minimum of 80% Loan to Value (LTV) ratio so they just take the purchase price and divide it by 80% to get the value needed so the loan can be funded and to speed things up. Although it doesn't matter to appraisers because they get paid either way. A lot of appraisals today are ordered through a third party that contracts out the appraisal bidding for banks because it absolves the financial from having a bias. >There is a lot of wiggle room for appraisals. Not once it's said and done. The appraisers cannot just change things in the appraisal cause the borrower complained. The borrowers can come back with comps or disprove inaccurate information such as incorrect sq footage and the appraiser can readjust it if they deem it necessary. They're on the line when an audit comes around and they're risking their license each time they do it, that's why they rarely ever change it unless the borrower is definitely right (which they rarely are, but it happens). > And if an appraiser is very motivated and willing to put in some extra time and effort looking for comps and finding reasons to increase, decrease based on other details, they can affect the appraisal greatly. They most definitely are not. They have no incentive to work harder on one appraisal over another aside from retaining repeat business if it's not ordered through the third party appraisal company. Financials try not to go with the same appraiser for all appraisals because then it looks as though we are the sole employer of an appraiser and therefore can become a serious audit issue. Auditors will look at everything, even some stupid doc that wasn't supposed to be in a file and write up the institution for it. >I wouldn't expect that the make huge differences, but i can imagine it having an aggregate effect of statistical significance. You are overinflating their power by a lot. Appraisers have far less influence on the loan process than the lenders do. The simple fact that there are for profit lending institutions that can charge single digit percentage fees on 6 figure loans or allow for 0-3% down just shows were heading for 2008 again. Except the only difference is investors know when they're buying risking mortgage securities as opposed to not knowing if all of them are good or bad.