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.
https://www.bloomberg.com/news...
https://www.bloomberg.com/news...
http://www.freddiemac.com/rese...
https://www.appraisalinstitute...
Greg. You're a very bright guy and I believe you will reliably go where the data leads you, not to your comfort zone. Would like to hear your take on these two Brentin Mock articles, the Freddie Mac study the first one refers to, and the statement by the Appraisal Institute the second one refers to.
Let me be clear, I'm not saying that racism and bias don't exist in the appraisal industry. I've been saying that we have no real evidence that it had any part in the original article linked.
I skimmed these articles so I may have missed it. So Freddie Mac says there is racism and bias in the appraisal industry. They have "proven this" by the fact that appraisals come in below contract price more often in black neighborhoods than white. Was this an objective study?
Where is the data on the race of the appraisers? Wouldn't this be one of the easiest ways to rule out bias? Isn't this an extremely important data point to know?
I'm not understanding throwing out 10+ million of the 12 million appraisals due to "due to missing values in the merge field and thus a low merge rate". 15.4% of Latinos were under-appraised in data set one, but only 8% in data set two. This is compared to 7.4% to 6.5% for whites. Does that dramatic swing not concern you? 12M or 2M data points, with that large a sample size you should have similar results if the data is reliable.
At the end, the Freddie Mac study that clearly wanted there to be bias stated: "our analysis has not yet determined the full root cause of the gap". The good news is that I'm sure with trashing a few more million data points and tweaking the weighting of "for property and neighborhood characteristics", they will be able to prove white appraisers are racist.
OK, Greg. Freddie Mac states that there is racism and bias in the appraisal industry. Did you look at the other article? It's by the Appraisal Institute, the appraisers themselves, more specifically the largest trade association of appraisers in America.
THEY state that there is racism and bias in the appraisal industry.
Come on. This is not all tweaked data points to make politically correct statements that make the black folks happy and buy their votes. I'm sure you really know this. But if you really, really, really want to die on this contemptible little hill, best of luck to you.
I'm not stating all appraisers belong to the KKK. I'm not stating that there is no variance between appraisers. I'm not stating that appraisers harbor deep, secret resentments against black folks. I AM stating that there is certainly systemic racism and unconscious racism inherent in a lot of subjective decisions and variable processes used to arrive at a decision, such as many that go into determining the value of a property.
And I've seen more than enough of how things do and do not work in the part of America that I live in to suspect that there is a LOT of systemic and unconscious racism in A LOT OF DECISIONS that have to do with real estate.
If I were black and I needed an appraisal on a house, I would certain hire a white impersonator to pretend he was me. With a white wife. And white children. Maybe a white cousin. Pay some little white kids on itty-bitty bikes with training wheels, kneepads, elbow pads to play outside. Sweet Home Alabama would play softly on the hi-fi. SPF 40 SUNSCREEN WOULD BE EVERYWHERE. Put up pictures of blond-haired, blue-eyed Jesus carrying a little white lamb and ministering to his equally Nordic disciples. Put a leftover quiche in the fridge. Stir some raisins into the potato salad, just in case. All hair-straightening products would vanish. No washcloths necessary. No cocoa butter anywhere. No shaving powder. No. 1 and No. 2 on the Estee Lauder makeup kits, nothing else. Doris Lessing and James Baldwin would vanish from my bookshelves. Hell, I'd hide all my wife's Pushkin poetry and The Three Musketeers, The Count of Monte Cristo, The Man in the Iron Mask.
OK, Greg. Freddie Mac states that there is racism and bias in the appraisal industry. Did you look at the other article? It's by the Appraisal Institute, the appraisers themselves, more specifically the largest trade association of appraisers in America.
THEY state that there is racism and bias in the appraisal industry.
Freddie Mac gave numbers used in their study and detailed most of their methodology including the statistical formulas they used. They admitted they did not come up with proof of bias. They found discrepancies, but why wasn't proven. While I liked 90% of what they did, the discarding of 10M+ sets of data and then producing vastly differing results clearly points to a problem in the study. Garbage in, garbage out.
As for the Appraisal Institute, from their "there's bias everywhere" article, [...]a recent study by the American Enterprise Institute found that "appraiser racial bias on refinance loans is uncommon and not systemic." Then they talked about bias due to a dirty home...
I truly wonder how many of these appraisals that were "racially biased" were done by minorities. Why was this not tracked? Perhaps because it would undermine the desired results?
OK, Greg. Freddie Mac states that there is racism and bias in the appraisal industry. Did you look at the other article? It's by the Appraisal Institute, the appraisers themselves, more specifically the largest trade association of appraisers in America.
THEY state that there is racism and bias in the appraisal industry.
Freddie Mac gave numbers used in their study and detailed most of their methodology including the statistical formulas they used. They admitted they did not come up with proof of bias. They found discrepancies, but why wasn't proven. While I liked 90% of what they did, the discarding of 10M+ sets of data and then producing vastly differing results clearly points to a problem in the study. Garbage in, garbage out.
As for the Appraisal Institute, from their "there's bias everywhere" article, [...]a recent study by the American Enterprise Institute found that "appraiser racial bias on refinance loans is uncommon and not systemic." Then they talked about bias due to a dirty home...
I truly wonder how many of these appraisals that were "racially biased" were done by minorities. Why was this not tracked? Perhaps because it would undermine the desired results?
I think I understand, Greg. The standard for bias is a moving target, and it will keep moving until a social phenomenon's existence can be shown to exist with the same standard of proof that water can be shown to be wet.
Everything else is bad research, bad data, and let the black people complain all they want. Big Tobacco did great with this legal strategy for generations after they established to their own internal satisfaction that they were in the addictive-drug-delivery business. I think it took seven decades to get the industry to admit that cigarettes cause any sort of health problems whatsoever. Bully for them, bully for you. Bury the problem, and then bury the shovel.
@Jim K. “Stir raisins into the potato salad” and “no cocoa butter anywhere” 🤣🤣🤣
Serious topic, serious discussion points, serious sources of data! But not taking oneself too seriously—we love it!