Avoiding Bias. How do other investors do it?

106 Replies

A CA couple is suing an appraiser for what they assert is a lowball appraisal: https://www.washingtonpost.com... For a second appraisal, they removed all hints that a black couple lived in the home and they asked a white friend to meet the appraiser.

We do this! My wife is very fair skinned. Me, not so.  When we get our properties appraised, hold open houses for potential tenants in our rentals or market our rentals online, my wife is always our front person.  I make sure I am nowhere to be seen because of my darker skin.  While we know that MOST people are not racist, because we seek to secure top value for our properties--we also realize that SOME people are.  If a potential tenant will pay top dollar or an appraiser will value our house differently if they don't realize that we are black, then we have no issue renting to or getting an appraisal from someone who has a racial bias.  If they do not know we are black, they cannot use their bias against us.

I'm curious if any other investors here engage in similar posturing to get around the potential biases of some appraisers, renters, partners, banks, etc?

Life is full of biases based on all sorts of things. 

If this works for you great, but the black guys I have seen in this business who are "Tearing it up" work heavily on the offense (earning side) vs the CYA side... (Driving a Bentayga isn't exactly keeping a low profile). 

But if you can earn more by doing this---go for it.

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I’ve had a similar issue. I had black tenants with 3 kids living in a newly remodeled property and the appraised value came in lower than I had expected. If they were white tenants I think it would have been 15-20% higher. They weren’t the cleanest tenants though and had their stuff crammed everywhere so it’s hard to say with certainty… just my feeling. I think you have the right solutions with dealing with members of the public; it’s business not personal so you adapt to it. 

@Allen L.

Just because you expected the appraisal to be higher, has nothing to do with the skin color of your tenants. Maybe you just thought your house was worth more than It is.

Originally posted by @Matt M. :

@Allen L.

Just because you expected the appraisal to be higher, has nothing to do with the skin color of your tenants. Maybe you just thought your house was worth more than It is.

 ^^^ This. My first thought was - what was the 2nd appraisal value? How much difference was there between the two?

Anyway, even if some bad s**t is happening, just deal with it, move on, be the winner you know you are. Plenty of people overcome way more than what you're talking about, it shouldn't hold you back.....don't let it!

@Matt M. comps made it pretty obvious, a lot of transactions with similar build nearby. 

@Allen L.

That’s all well and good, but doesn’t mean the the appraiser was bias.

Here is a personal appraiser story from my own experience-

I was getting divorced in 2008. Appraiser hired by my ex’s attorney came in at $205k.

Appraiser out of the phone book chosen by my ex and I, and given no info of divorce came in at $273k.

Now.. that’s bias.

Originally posted by @Allen L. :

@Matt M. comps made it pretty obvious, a lot of transactions with similar build nearby. 

Every appraiser I've ever used came in with different numbers. I ask for second appraisals. I wear a cowboy hat, ride horses and carry a gun. Liberal appraisers hate that and downgrade accordingly. I don't care. To blame it all on only racial bias is, at best, pathetic. It's too easy to go there and everyone does it nowadays. Everyone just man up - deal with it. Stop whining.

Originally posted by @Ron Brady :

A CA couple is suing an appraiser for what they assert is a lowball appraisal: https://www.washingtonpost.com... For a second appraisal, they removed all hints that a black couple lived in the home and they asked a white friend to meet the appraiser.

We do this! My wife is very fair skinned. Me, not so.  When we get our properties appraised, hold open houses for potential tenants in our rentals or market our rentals online, my wife is always our front person.  I make sure I am nowhere to be seen because of my darker skin.  While we know that MOST people are not racist, because we seek to secure top value for our properties--we also realize that SOME people are.  If a potential tenant will pay top dollar or an appraiser will value our house differently if they don't realize that we are black, then we have no issue renting to or getting an appraisal from someone who has a racial bias.  If they do not know we are black, they cannot use their bias against us.

I'm curious if any other investors here engage in similar posturing to get around the potential biases of some appraisers, renters, partners, banks, etc?

It happens all the time, nationwide.  https://www.usatoday.com/story... If I were you I would also ask a white male friend to pose as your wife's long-time stable husband on appraisal day. Maybe put up a few professionally-taken pics of both of them with 2-3 pretty white children around the house in nice frames, a fake shot of them renewing their vows...anything to make the appraiser believer this is a nice white home and they're talking to the fine, upstanding white folks who live in it. It might not help but it certainly won't hurt.

I'm white, so I don't have to deal with this particular kind of bias, but there are certain underlying assumptions that I also have to work around in my own business. My wife is blonde and pretty, but she's also Russian and speaks with an accent. There's an immediate assumption from many insular Pittsburghers that I bought her off the Internet. That assumption has been made explicit to me more often by black Pittsburghers than white Pittsburghers here, by the way.

In our third year of operation, Homeland Security and the IRS subpoenaed us and we had a very uncomfortable conversation down at the federal courthouse. Now, I'm not saying we were racially profiled, but a Greek dual citizen married to a Russian nationalized citizen with plenty of Eastern European associates and friends...hell, if I was the Justice Department, I would want a closer look at us, too and good for them for doing their jobs. I'm also pretty sure some of our tenants think we might be backed up with Russian mafiya muscle. This is not necessarily a bad thing with some of our tenants.

Anyway, I understand it's good for my tenants to see that I don't order my wife around and that she handles the money in the business. I make a point of illustrating this frequently in front of my tenants, placing fake calls to her to ask about money decisions, things like that. I think it helps. It certainly doesn't hurt.

Manipulate the system, win the game, make the money. That's how I see things in this broken world. Anything else you feel you have to do, do later and outside the context of your business.

Agree on the appraisal strategy, it is an unfortunate aspect of life.

Disagree on preferring bigoted tenants that may pay more than others.

@Scott Mac Thanks for the input Scott.  Are you able to share some examples of what specific actions/behaviors the people you know who are "tearing it up" take?  We're eager to learn, improve and earn.  Thanks!

@Allen L.

Thank you for sharing your story! Good luck with your continued investments.  I think there is enough evidence out there to approach each situation by taking actions to try to hide those things that some will be biased against. Appreciate your chiming in.

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@Bruce Woodruff Appreciate your sharing your perspective.  Not sure the "stop whining", "man up" and "blame it all only on racial bias" comments were the most informative/helpful to us, but we nevertheless appreciate your chiming in.

@Patrick M. Fair point and perspective.  What we love about real estate is that it really allows multiple different people to pursue wealth in ways that work for them.  Best wishes to you in your journey and as fellow NJ investors, perhaps our paths may cross in the future and we can be helpful to each other!

Originally posted by @Ron Brady :

@Bruce Woodruff Appreciate your sharing your perspective.  Not sure the "stop whining", "man up" and "blame it all only on racial bias" comments were the most informative/helpful to us, but we nevertheless appreciate your chiming in.

I meant nothing personal to you, Ron....I've noted your posts here and you seem like a good guy. Just using the terminology that works for me. There will always be prejudice in the world, it is human nature, usually nothing more. So if you can't change human nature, you just need to look at it differently and deal with it in ways that benefit you. Life is too short to worry about the small stuff.....

Originally posted by @Ron Brady :

@Scott Mac Thanks for the input Scott.  Are you able to share some examples of what specific actions/behaviors the people you know who are "tearing it up" take?  We're eager to learn, improve and earn.  Thanks!

Michael Ealy (and partners) do business as Nassau Investments, check him (them) out on the internet and on YouTube.

But like I said before, maybe hiding is the best strategy where you are at, and for the people you deal with--that's your judgement call.

Good Luck!

@Ron Brady

I feel appraisers are like real estate agents: Most of them suck and being a licensed agent or appraiser doesn't necessarily make you good or even competent at your job. It just means you were able properly fill out paperwork and pass a test. I've been stuck with bad appraisals on my personal residence and investments as well. When asking for explanations, some of these appraisers seem to make things up out of thin air to justify their low appraisal, and others just don't seem to understand real estate very well.

A lot of appraisers have confirmation bias and will never admit they're wrong or missed something. You can throw all the comps in the world at them and they'll still stick to their original appraisal. 

And there are others who have prejudices and do not want you to succeed. The best thing to do is try to find another appraiser or potential tenant. Ultimately, we cannot remove the bias in the minds of those who wish to behave in such a manner. It's sad that this is our reality in this day and age.

@Ron Brady ,

One thing I ALWAYS do when getting an appraisal done, I send them an excel file listing all of my improvements done the house.  and show them similar houses based on YEAR BUILT,  construction type/style, and similar size +- 500 sq ft, and within 2 miles.    My job is to plant a seed, and help show them what I view as most similar comps based on logic.    The main question you need to ask yourself-- is my house being compared to flips or ones that need renovation?   I try and prove my case ahead of time, show specifics! 

I absolutely feel for you, and it sucks-- it does.    When we started out, I would talk to the roofing contractors, and you know what--- we got screwed and they ripped us off big time, doubling the price of the roof....  shady contractors aren't afraid to screw over a girl.. it sucks, so now my husband deals with them directly, he can talk their lingo/terminology and call BS ... whereas I do the financing/marketing/numbers side.    

Whenever I do do showings, I dress in my regular casual work clothes, and sometimes have  our workers do the showings-- how someone treats people that they don't think have power tells me everything I need to know. 

Originally posted by @Ron Brady :

A CA couple is suing an appraiser for what they assert is a lowball appraisal: https://www.washingtonpost.com... For a second appraisal, they removed all hints that a black couple lived in the home and they asked a white friend to meet the appraiser.

We do this! My wife is very fair skinned. Me, not so.  When we get our properties appraised, hold open houses for potential tenants in our rentals or market our rentals online, my wife is always our front person.  I make sure I am nowhere to be seen because of my darker skin.  While we know that MOST people are not racist, because we seek to secure top value for our properties--we also realize that SOME people are.  If a potential tenant will pay top dollar or an appraiser will value our house differently if they don't realize that we are black, then we have no issue renting to or getting an appraisal from someone who has a racial bias.  If they do not know we are black, they cannot use their bias against us.

I'm curious if any other investors here engage in similar posturing to get around the potential biases of some appraisers, renters, partners, banks, etc?

 I have witnessed racial bias first hand on several occasions. It wasn't appraisals, but bias exists anywhere humans are involved.  What people don't understand is that most racial bias isn't outright racism. The appraiser wasn't wearing a white robe when they did the appraisal and they probably deny any bias. I am sure they believe they are not bias, but that doesn't mean it didn't factor into their appraisal. There is also the reality that some appraisers are bad at their jobs and they could have undervalued the property out of negligence.

Any time you are selling or renting a property, it is good to remove personal photos, regardless of the color of your skin or size of your family. It is also good to neutralize the appearance of the property. Avoid bold colors and political or religious decorations that could offend someone. You want the buyer/renter to envision this as THEIR home. That is hard to do if they see decorations that personalize it to others.

As far as having your wife show the property because her skin is lighter, I disagree with this approach. If she is a better "people person", that is fine, but don't stand in the background because your skin is dark. The only way to change racial bias is by people seeing YOU. You are a landlord and a property owner. If people have a problem with that, they can go to hell. Sorry but it is 2021 and we all need to move past this nonsense. I am a firm believer in confronting issues head on. If you have concern that the appraiser may lessen value because of the color of your skin, share that concern when you first meet them. "Appraiser, I have read stories of appraisal values coming in lower when the appraiser knows a black person owns the property. I am not accusing you of any bias, but I have concerns that this could affect my property value." Making the appraiser aware of your concern will make them conscious of their own bias. It may even make them sympathetic and more likely to increase your appraisal value. 

Unfair appraisals can happen regardless of who owns the property and you always have a right to contest. I have had appraisers undervalue properties multiple times. I sometimes think if they know it is rental property, that alone decreases the home value. 

One final comment. I have my wife do property showings sometimes because she comes off as more friendly than I do. Using this to your advantage is smart, so nothing wrong with having your wife meet people. Just do it for the right reasons.

Originally posted by @Ron Brady :

A CA couple is suing an appraiser for what they assert is a lowball appraisal: https://www.washingtonpost.com... For a second appraisal, they removed all hints that a black couple lived in the home and they asked a white friend to meet the appraiser.

We do this! My wife is very fair skinned. Me, not so.  When we get our properties appraised, hold open houses for potential tenants in our rentals or market our rentals online, my wife is always our front person.  I make sure I am nowhere to be seen because of my darker skin.  While we know that MOST people are not racist, because we seek to secure top value for our properties--we also realize that SOME people are.  If a potential tenant will pay top dollar or an appraiser will value our house differently if they don't realize that we are black, then we have no issue renting to or getting an appraisal from someone who has a racial bias.  If they do not know we are black, they cannot use their bias against us.

I'm curious if any other investors here engage in similar posturing to get around the potential biases of some appraisers, renters, partners, banks, etc?

My wife generally does showings of rentals and open houses because she's prettier than I am...I'm sure most of you will find that hard to believe, but it's true....she's prettier. 😊

Also, she seems to be a much better judge of character than me and seems to be able to read people better than I can. I'm so caught up in trying to show the property and trying to be nice and friendly that I sometimes forget to look at who I am showing the property to. She has a good instinct for good people....that's probably why she married me, hehe.