Easy Ways To Spot Real Estate Appraisal Bias

Bias in real estate appraisals is an unfortunate reality that many marginalized communities and people of color continue to deal with to this day. Despite being outlawed, the lingering effects of property prices being linked to race have resulted in a seemingly unconscious bias in the minds of appraisers, having long-term implications on the financial well-being of working-class families. 

A 2020 study based on 12 million appraisals found that the racial composition of a neighborhood shaped housing values far more in 2015, and than in the 1980s. In fact, 12.5% of appraisals in Black census tracts, and 15.4% of appraisals in Latino areas resulted in values lower than the contract price. All of this points towards a clear systemic bias in appraisals, with dire implications for minority communities.

In this article, we dive deep into this topic and come up with ways to easily spot such biases while getting your property appraised.

1. Check The Comparables

An appraisal report should include a list of comparable properties based on which the value of the subject property was determined. 

Appraisers have quite a bit of discretion in this regard, but the properties used for comparison should be located within the surrounding vicinity, and be of similar age, type, square footage, and condition to be worthy of consideration.

It is possible that the appraiser was unable to find any relevant comparable sales in your area, but if there were such sales, and the appraiser has failed to consider them, homeowners have the right to dispute the report.

In such cases, it is often recommended to engage a realtor using services such as PrimeStreet, and whether you’re looking to find a home or value, refinance, or sell one, having an experienced realtor by your side is very beneficial.

2. Review The Appraiser’s Credentials

Each state has a different set of rules regarding the level of experience, competence, and credentials required for performing reviews. Homeowners should be aware of these requirements and ensure that their appraiser satisfies them.

Beyond the credentials, being an appraiser takes substantial knowledge, skills, and understanding of the local area. If you feel that the appraisal that you’ve received for your house isn’t fair, make sure to dig into these factors of the appraiser, and request a reconsideration if you feel that it is warranted.

3. Watch Out For Red Flags

Any biases or prejudices that your appraiser might harbor will be evident by sifting through their comments and remarks. 

While not apparent, any extended reference to the racial or ethnic makeup of a region is a red flag that must be dealt with.

Red flags can also extend to certain inconsistencies, such as contrasting statements at different stages of the report, and even glaring errors such as mistaking the size or built-up area of the property. Any of this can result in a good case for an appeal to reconsider.

4. Get A Second Opinion

If you have concerns regarding the accuracy of the report or the professionalism of the appraiser, you can always get a second opinion. Make sure to go for someone unrelated to the initial appraiser, and any variances between the reports can be used to refute the findings in the first appraisal.

Appraisers, in general, would be unwilling to change the values they come up with unless they’ve made a mistake, as they need to answer to the underwriters, state regulators, and even the Uniform Standards of Appraisal Practice (USAP). 

As a result, getting a second opinion is often the best course of action to confirm the findings of the initial report, and minimize the impacts of any biases and prejudices that an appraiser may have had while drafting the report.

Final Words

While bias in appraisals still remains a significant problem, for discerning homeowners, such malpractices or instances of prejudice can be spotted from miles away. 

Just make sure to thoroughly vet the appraiser, as well as the report they deliver, and any such inconsistencies, or red flags become fairly evident.