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?
@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.
You hit the nail on the head! It's frustrating that these gatekeepers are so stubborn at times. Of course no one likes to admit a mistake and get one-upped at their job, but the power appraisers wield is crazy and I don't think they understand how much they affect the well-being of others. For a large amount of Americans, their home (investment or personal) is their most valuable asset. Losing tens, and sometimes 6 figures, worth of value can hurt generational wealth.
I always like to ask questions before getting emotional just to ensure there wasn't something I missed on my end. I have no problem being corrected and educated, but sometimes I can't help but question some appraisers credibility.
Example: I have near panoramic 360-degree views of mountains and hills from my residence. I had an appraiser tell me my home didn't qualify as having a view since the desert behind my property is supposed to have new homes built at some point in the future and that there wouldn't be a view at that time. He seriously used a hypothetical scenario to knock my home value. Now technically he isn't wrong. The development project he spoke of has been on record with the city since 2008. A full 200 page PDF with all details down to the species of trees that would go in alongside the homes. Here we are in December 2021 of and there is no construction yet, no site prep, no fencing, nothing. It's almost 2022 with nothing done to the land and the mere possibility of homes going in across the street was enough for him to say my home didn't have a view.
I've experienced this firsthand. Several years ago I was doing a refinance and the appraiser of a different race did a fairly superficial walk-thru. He asked about upgrades and was fairly dismissive of what was done. I'd point out that the bathrooms were completely remodeled and he'd shoot back "but they aren't newly added, bathrooms were here before". Things like that. I don't recall the exact numbers, but the appraisal came in around $900K. One of the comps he used was on a lot where 75% was unusable steep hill and the house hadn't been updated since WW2. It was purchased by a flipper and torn down.
Shortly thereafter I had a get together which included my real estate agent. The topic came up and I mentioned we just got the appraisal and were very surprised at the number and (without her knowing the number) asked what she thought it would sell for. She responded it would immediately sell for $1.5M and given how hot the market was, she would not be surprised if the appraisal came in at $1.7M-$1.8M.
All these years I chalked it up to the appraiser just being s****y at his job. After reading the article, I realize it was racism. That must be the answer.
BTW, I'm white.
There is nothing in the article that says this is racism. I'm not saying it's not, but before condemning her, I'd like to know if there are 20 other black homeowners that she undervalued their properties while properly valuing homes for 20 white homeowners. Perhaps she's out of touch with the crazy market or the enclave this home is in is not her usual territory or she just didn't like the home? Wouldn't you like to know that before declaring her a racist?
Now, if you want to see real racism in the article, focus on this paragraph: As for the Austins, they bought the four-bedroom, two-bath house in 2016 for $550,000 when it had 1,248 square feet. Before purchasing, they’d struggled to compete in a hot housing market. But the previous owners, keen on helping a Black couple achieve homeownership, sold them the place off market.
Would you have had a problem if the article read: As for the Smiths, they bought the four-bedroom, two-bath house in 2016 for $550,000 when it had 1,248 square feet. Before purchasing, they’d struggled to compete in a hot housing market. But the previous owners, keen on helping a White couple achieve homeownership, sold them the place off market.
honestly what people assume to be bias really isnt. an appraisal is an opinion of value, so different appraiser will have different values. you cant choose your appraiser(before you could), they get assigned the job. they get paid a flat fee whether your value is high or low so they dont care what your appraised price comes out to as long as they can explain it. they usually dont over value it because that could lead to overinflated fraud(the reason you cant choose your appraiser anymore, banks went with their go to appraisers who appraised high so that they could get people to qualify for mortgages and sell the mortgages off) which they dont want to deal with.
so most of the time appraisals will come right at the asking price because they are lazy and just want to do a fast job to move onto the next one and can justify it with comps. other times they will actually run all the adjustments and do a good job and if its highly upgraded then it may come in a little higher or if its not in best presentable condition it could come in lower depending on what the appraiser thinks the property is compared to comps.
doing an appraisal is more complex than just running comps and comparing pirce/sqft like most investors and realtors do. you have sqft living, sqft land, easments, bed count, bath count, garage vs carport vs no onsite parking, condition of home, location, etc. again its just an opinion of value, so one appraiser might think there should be a 10000 adjustment to one line and another might think it just needs a 7000 adjustment. some might look at your messy property that just needs a new paint job and flooring and adjust the condition lower than someone who knows thats all it needs.
so to say an appraiser is bias doesnt make sense to me because they gain nothing by intentionally lowing your value because of skin color. they just want to get paid and move on the next one with the least amount of work. if you said some appraisers are incompetent, then yah i would have to agree but you cant choose which ones you get.
I really dont delve into it that deep. This is America and we clearly know racial bias exists. It can impact any and everything. However, I just dont automatically assume its a racial motivation if my appraisal comes in lower. There are millions that come in a day and I have hundreds of minorities in my network. Very few say they have experienced this. I feel once I was being red lined but I couldnt prove it and I wasnt sure. It could have been dozens of other things, so unless I have brazen and clearly obvious proof I am not going to consider it a racial angle. Also, with all these articles about getting a white person to be a front person is something I will NEVER do. Again, we know bias raises its head in everything and clearly there where cases where this has occurred but I personally dont feel its wide spread as some people will make it out to be. If there are multi millions of appraisals a year and we can google maybe 10 cases of an obvious devalue; and we know its a racist as opposed to a dumb appraiser, those are damn good odds. No, I personally dont feel I have a very high chance of getting a lower appraisal because of my race. If I did, Id make sure I have all Black lending institutions and Black appraisers. If you feel this has happened and they cant justify it, they are in serious trouble so go after them if it does.
honestly what people assume to be bias really isnt. an appraisal is an opinion of value, so different appraiser will have different values. you cant choose your appraiser(before you could), they get assigned the job. they get paid a flat fee whether your value is high or low so they dont care what your appraised price comes out to as long as they can explain it. they usually dont over value it because that could lead to overinflated fraud(the reason you cant choose your appraiser anymore, banks went with their go to appraisers who appraised high so that they could get people to qualify for mortgages and sell the mortgages off) which they dont want to deal with.
so most of the time appraisals will come right at the asking price because they are lazy and just want to do a fast job to move onto the next one and can justify it with comps. other times they will actually run all the adjustments and do a good job and if its highly upgraded then it may come in a little higher or if its not in best presentable condition it could come in lower depending on what the appraiser thinks the property is compared to comps.
doing an appraisal is more complex than just running comps and comparing pirce/sqft like most investors and realtors do. you have sqft living, sqft land, easments, bed count, bath count, garage vs carport vs no onsite parking, condition of home, location, etc. again its just an opinion of value, so one appraiser might think there should be a 10000 adjustment to one line and another might think it just needs a 7000 adjustment. some might look at your messy property that just needs a new paint job and flooring and adjust the condition lower than someone who knows thats all it needs.
so to say an appraiser is bias doesnt make sense to me because they gain nothing by intentionally lowing your value because of skin color. they just want to get paid and move on the next one with the least amount of work. if you said some appraisers are incompetent, then yah i would have to agree but you cant choose which ones you get.
@Royce Talbo That was a superficial view of the problem. How can two licensed professionals appraise the same property and come up with values that are $500K apart? I see gross incompetence or a confirmation bias in action. We are talking about half a million dollar difference in a professional opinion. These are not random people making wild guesses. These are trained and licensed professionals.
With such a huge difference in opinion, we need to dive deeper and start asking questions. Unfortunately, unless people start questioning these type of discrepancies in "expert opinions", some people in this country will continue to suffer from this type of artificial devaluation of their properties.
This is not the first time people of color have complained about this problem. Here are other examples of a similar situations
@Jay Thomas if you are talking about the article i am unable to read it. I was talking about in general. yes there can be bias like in everything else people will go out of their way to hurt others but for the most part some people just dont understand how things work and jump to conclusions that it was bias racist etc. just trying to clarify what people assume to be bias in general isnt if they just understood how things work.
Now, if you want to see real racism in the article, focus on this paragraph: As for the Austins, they bought the four-bedroom, two-bath house in 2016 for $550,000 when it had 1,248 square feet. Before purchasing, they’d struggled to compete in a hot housing market. But the previous owners, keen on helping a Black couple achieve homeownership, sold them the place off market.
Would you have had a problem if the article read: As for the Smiths, they bought the four-bedroom, two-bath house in 2016 for $550,000 when it had 1,248 square feet. Before purchasing, they’d struggled to compete in a hot housing market. But the previous owners, keen on helping a White couple achieve homeownership, sold them the place off market.
Good point, Greg. Race favoritism works both ways - it's not racist, that definition is always used incorrectly, so I don't even use the word anymore, most idiots have forgotten the meaning, it's just a convenient term to throw around ....
@Ron Brady it’s sad to even think this is a problem any of us need to even discuss. Not getting into anything, but people need to realize we all need each other to live and stay sustainable. God bless, hope for the best to come.
I had a car for sale. I showever the car to 10-12 people at the mobile home I lived in. Not one person wanted to buy the car. The next week I listed the car at my wife's parents 5 bed 2 bath Hoa neighborhood home. The first guy that looked said let me think about it. I sold it to the second person for asking price, and the first buyer called back to say he wanted it. I am a white male. Sometimes there's biases beside your skin color.
@Ron Brady - wow that really bites. I am so sorry you have to do that & good for you for walking around those obstacles. I often wonder how much I am treated differently for being a female.... I know many times it has had a large impact on the situation and the outcome. Like you I have figured out ways to flip the script and make it work for me.
We all have unconscious biases, it's human nature..... hopefully conversations like these will help illuminate them....
@Ron Brady
HI Ron,
Sorry to hear that you feel your skin color is interfering with your ability to gain wealth in real estate. Truth is, yes there are many racist people in this world, it is not limited to just black people.
My advice is don't let it stop you from taking the high road.we all have our challenges, God knows I have mine. The key in all of this is to take advantage of your strengths. I am a strong believer that if you work hard to give yourself a good name, there will always be someone who will try to do the opposite to you. I go out of my way to prove them wrong.
I am well known in my general area, I am a strong hand shaker, and I make sure people will remember me as an outstanding person. Anyone who is against me is usually because they are jealous.
I guess all I can say is, if someone doesn't like you because you are black, then they don't deserve your business. Do business with people who are real, and can appreciate someone who is trying to live the American dream.
Many of those appraisers are under qualified and simply incompetent. There should be a objective real world test on those appraisers before they can take on their job. Let a group of them appraise a few sample homes, and then compare the actual sold price vs their appraisal value. Rate them based on their accuracy, and disqualify those at the bottom.
@Bob Okenwa We appreciate the thoughts and perspectives and have also found, like you have, that talent is not equally distributed amongst professionals. And we too have found that "we cannot remove the bias in the minds of those who wish to behave in such a manner". Best wishes to you in your investments.
@Linda S. Really appreciate the concrete ideas you've shared. We too provide appraisers with a file including a spreadsheet of our improvements, area comps and before and after photos. In my wife and my distribution of labor, I create those. And I agree that, at minimum, it creates a set of facts to start the discussion. Love this tip!
Also appreciate your perspective on contractors, which is something we had not considered. My wife typically meets with them and we now have a set of contractors we regularly use and trust. But, if we deal with new ones, I do think there is a value in, potentially, me considering being the front guy. Great thought.
And we fully concur re: "how someone treats people that they don't think have power tells me everything I need to know." Great filter! Best wishes to you and your husband in your investing and thanks for weighing in.
Really appreciate your perspective here. And we appreciate your push on the idea of me being present. While we concur, in concept, that fighting bias requires a very in-present approach we've decided that if we suspect potential bias, we prefer the biased person's money or opinion that will earn us money over the alternative. Of course, we know that this is not the approach for everyone, but it works for us.
In our lives pre-real estate, we spent quite a bit of time confronting those we suspect of bias. When we did so, we were frequently met with various forms of denial, claims of "I am not racist, sexist, etc", "you must have misunderstood", "it wasn't racism--it was something else", etc. Of course, we could never know the motivations of the perpertrators of the misdeeds, but we found that the mis-doers rarely saw things differently or changed their ways or even owned their biases when confronted. In the larger public square, like here, we still engage the issues.
Best wishes to you in your investing!
@Tony Kim Love the perspective and humor! And like your wife, mine is far prettier than I am and she also knows how to suss out people--not sure why she chose me, but I'll take it! Thanks for weighing in!
@Greg M. Appreciate your weighing in.
re: "All these years I chalked it up to the appraiser just being s****y at his job. After reading the article, I realize it was racism. That must be the answer." "Wouldn't you like to know that before declaring her a racist?" and
"Would you have had a problem if the article read..."
Not sure what actionable steps we and others can take to work around bias based on your input, but my wife and I appreciate your sharing your thoughts. Best wishes to you in your investing!
@Royce Talbo Thanks for weighing in and my wife and I appreciate your perspective.
re: "so to say an appraiser is bias doesnt make sense to me because they gain nothing by intentionally lowing your value because of skin color" WE AGREE--it doesn't make sense to us either. This said, it has been our experience that while bias is a very human characteristic, it is, by definition, not consistently rationale. And yet, it is something that happens nevertheless.
Best wishes to you in your investing!
@Mark Cruse Thank you for sharing your perspective and experience. We appreciate your weighing in. Best wishes in your investing.
I appreciate the candidness of this post and your courage to raise the question and let others weigh in. I think some awesome examples have been shared as well, in terms of how others have approached this problem, and prepared themselves and the professionals they are working with in general, to try and elicit the best outcomes. For those that think it’s not a problem or that appraisers don’t have biases that negatively impact our properties, I put them in the “all lives matter” category of just not really understanding some of the issues we face as black people living and doing business in our world. That being said, my hope is that keeping the dialog going to raise awareness and promote open and reflective discussion on these issues will help to address some of the very real challenges we navigate. We continue to be creative in our navigation of these challenges (can you say “resiliency” ?) and it sounds like you and your wife are doing that. Best of luck and thanks for sharing.
@Jay Thomas@Jay Thomas appreciate your sharing and hearing your alternative perspective to that shared by @Royce Talbo.
In our lives outside of real estate, we've had the benefit of being exposed to quite a bit of research that comes to the same conclusion you appear to--that there are outcomes in real estate that are difficult to explain if bias is not the source of the individual behaviors. I previously posted in the forums about one such report from Redfin: https://www.redfin.com/news/un...
Glad to know that you're part of this discussion.
@Aria Azarli Thanks and we appreciate your sharing your thought on this topic
@Colby Sullivan Great example of how to work around some people's bias! Thanks for sharing!
@Mary M. Well said--we're all about recognizing that humans are biased, even irrationally so, and we're always trying to find ways to compensate for it. We appreciate your sharing your perspective and hustle on this same issue. Best wishes for your investing success!
@Richard Hadley Appreciate your weighing in. We hear what you're saying and we respect your perspective. To be really candid, if our machinations result in a someone renting from us because they are the best candidate but they don't realize we are black, and we then build wealth from them, we feel pretty good about that. But we definitely understand the idea of not doing this and respect anyone who takes that path.