This is Part I of a deep dive into the home appraisal industry, which has faced a growing number of claims of racial bias. Today we explore the origins of the appraisal industry and its current lack of diversity. In Part II, we will examine what hard evidence of bias exists, and the assumptions behind home appraising.
Pat Turner’s mother was a child welfare worker in Suffolk, Virginia, during the Jim Crow era, who helped children of all races.
“My mother would come home about every month with a new child. And she would run that child a bath, and throw away their clothes, and give them clothes of mine to wear,” he said.
Turner said his mother was “well ahead of her time,” a white person in southern Virginia who supported the civil rights movement during the 1950s.
Turner attended the University of Richmond, graduated in 1972 and stayed in the Virginia capital to work as a real estate appraiser. Now in his 49th year on the job, Turner bristles at accusations that home appraisers discriminate against racial minorities. But he acknowledges that social observations enter into his calculations.
“Where the lines are drawn are where the employment rates are out of balance. When you ride through a neighborhood, and there are guys smoking something midday that are definitely of employment age. The Black neighborhoods get hit harder by unemployment,” said Turner, who has run P.E. Turner & Co since 1990.
For Taryn and Damon Harris, a Black couple who founded the Richmond residential brokerage Teal House Company, home appraisers are a problem — devaluing their home sales, and in the process reinforcing Richmond’s 400-year-old history of separate and unequal. Appraisers are so reliably biased, Taryn Harris said, Black homeowners know to “de-Black” their home before the appraiser comes knocking, such as by removing Black family photos from a home.
The Harris’s are part of a growing chorus of unease and anger with home appraisers. In just the past year, a newsstand’s worth of publications — the New York Times, the Washington Post, the Indianapolis Star — have reported on specific racist conduct by appraisers. The stories create a feeling of momentum — a creaky profession filled with old, white men facing a long overdue reckoning.
Amy Klobuchar, the Minnesota senator and former presidential candidate, declared in March that bias “results in home appraisers assessing lower home values to communities of color due to the area’s racial make-up.”
In April, Missouri representative Emmanuel Cleaver proposed the Real Estate Valuation Fairness and Improvement Act, which calls for an interagency task force on valuation. Pointing to Jim Crow-era redlining, the proposal declares, “The harmful consequences of discrimination remain unresolved.”
The Biden administration also recently trumpeted the formation of a task force helmed by the U.S. Housing and Urban Development Secretary Marcia Fudge to examine home appraiser bias.
Some home appraisers welcome reform.
Others, like Mike Ford of Michael F. Ford Appraisal in Long Beach, California warn that a Biden task force, “That looks at things from the lens of disparate income or disparate impact would absolutely destroy the appraisal profession.”
So, what is behind this profession on the verge of destruction, or review, or its own demise?
Eugenics, redlining, and Wall Street crashes: An appraiser’s history
Real estate newsletters in the 1920s marketed leather “appraiser kits,” complete with a measuring tape and tags, said Georgia State University Researcher Rea Zaimi, who came across a picture of the kit in an archival collection in Chicago.
The bags were meant to resemble the ones doctors and lawyers carried. Yet real estate brokers had none of that prestige.
Decades before federal redlining, attorneys working part-time selling real estate struggled to shed their reputation as unscrupulous. The real estate industry worked to change those negative perceptions — partly through the invention of the appraiser and the adoption of eugenics in their valuation practices.
For lenders and investors, appraisers bought them some cachet. Appraisers also streamlined transactions, making real estate more liquid, and values more predictable. But to win the public’s admiration, appraisers fashioned themselves “custodians of communities,” Zaimi writes, which was code for protecting property values in white neighborhoods.
By the end of the 1920s, appraisal textbooks, many written by eugenics proponents, proliferated, asserting that race and class uniformity determined property value. One such book, in 1933, listed Chicago’s ethnic groups in order of their toll on property values.
When the federal government passed the National Housing Act in 1934, it created the Home Owners Loan Corporation’s color-coded neighborhood maps, effectively cementing the notion of redlining in federal law.
The practice was officially outlawed in the 1977 Community Reinvestment Act. But the redlining maps were never really stamped out, said LaToya Gray, an urban planning researcher at Virginia Commonwealth University.
Gray, who helped craft the 2020 master plan of Richmond, Va., where the university is based, said that the maps that current planners initially used aligned with the old color-coded maps.
“We were working with a map that was very discriminatory, unfortunately, very similar to what had been done before with property values. There were maps with ‘established neighborhoods’ and ‘non-established neighborhoods,’” Gray said. “They were primarily those that were redlined in the past.”
However, it wasn’t the disastrous consequences of eugenics being used in housing policy or redlining that eventually led to federal intervention in appraisals, but rather the 1987 Wall Street meltdown. That spurred Congress and Ronald Reagan’s administration to birth The Appraisal Foundation, a Washington nonprofit empowered to set industry standards.
Those standards evidently did not deter the appraisers’ role in the 2008 financial crisis.
“You had morally flexible mortgage brokers creating morally flexible appraisers to get deals done,” said Jonathan Miller, a veteran appraiser at Miller Samuel in Connecticut and frequent critic of his own industry.
In 2010, Congress passed the Dodd-Frank financial reform act. Also, that year, none other than Andrew Cuomo, then attorney general of New York, hammered out with Fannie Mae the “home valuation code of conduct,” or HVCC.
Or, as frustrated appraisers still call it today, “havoc.”
The unglamorous life: today’s appraiser
“Appraisers are lone wolves working out of their basement,” Miller said.
Like the gray wolf, appraisers are an endangered species. There were 78,000 appraisers in the U.S. at the end of 2018, according to the Appraisal Institute, the profession’s primary trade group, and just 40% of those focused on residential appraisals. (For comparison, there are more than 1.5 million residential real estate agents in the U.S., which exceeded the number of homes on the market in May.)
Seventy-nine percent of all appraisers identify as male, and 71% are over 50 years old, per the trade group. Eighty-five percent of appraisers stated they are white. Four percent said they were Hispanic, 1% reported as Asian and 1% said they are Black.
“Right now, America’s appraiser corps doesn’t look like America, unless your idea of America involves mostly balding, overweight white guys with clipboards and pocket protectors,” said Jeremy Bagott, who runs an eponymous appraisal company in Ventura, California.
Appraisers say they work 60-hour weeks when one counts commuting between properties. They’re freelancers, typically working on a flat fee of a few hundred bucks per appraisal. Post-Great Recession reforms mean appraisers increasingly don’t draw assignments from a lender, but instead a middleman called an appraisal management company, which rakes in up to 70% of that flat fee (some appraisal management companies claim this is really closer to 30% on average.)
Nevertheless, homeowners often see appraisers as the errand boy from the big, bad mortgage lender.
“The appraiser is typically the only party of the mortgage process that meets the homeowner,” said Maura Sweeney, a Chicago appraiser.
“In some cases, the appraiser becomes the target for the homeowner’s anger toward the lender,” said Sweeney.
Who speaks for the appraiser?
Then there’s The Appraisal Foundation, which in its 32 years has focused on training requirements, including 2,000 hours of apprentice training.
Jillian White, an appraiser at mortgage lender Better.com, says that the apprentice program deters people of color and women such as herself from becoming appraisers — but also any new blood.
“Finding a supervisor to take you on is incredibly difficult regardless of color,” said White, who during the apprentice application process changed her resume name to “J White” so home appraisers would assume she was a man. “It leads the industry to being passed down from father to son.”
Since 1990, David Bunton, a former Congressional staffer, has served as president of the Appraisal Foundation.
The Appraisal Foundation declined to make Bunton available for an interview but provided a statement attributed to the president. “Allegations of discrimination are a serious matter as the very standard an appraiser must follow in conducting an appraisal specifically prohibits bias of any kind,” Bunton stated. “It’s clear we must do more.”
In his rare public appearances, Bunton has not focused on discrimination, but the survival of the profession itself.
A 2019 Congressional hearing gave the world the image of Bunton not raising his hand when U.S. Rep. Al Green of Texas asked panelists to raise their hand if they believe harmful discrimination plays a role in properties in Black neighborhoods not being properly valued. But at that same hearing, Bunton asserted that 85% of property valuations done through mortgage loans are not primarily done by home appraisers, with much of the work now being done by automated valuation models.
While the Appraisal Foundation’s present goal is fighting for the human appraiser, the mission of the Chicago-based Appraisal Institute seems less clear.
The organization’s latest president, Rodman Schley, star of the reality show “Urban Conversion,” acknowledged last year that “unconscious bias” exists among appraisers.
“We must educate ourselves on potential bias, just as professions across America are doing,” he stated (like Bunton, Schley responded to questions with a written statement).
One mouthpiece for appraisers is the National Society of Real Estate Appraisers, an arm of the National Association of Real Estate Brokers, a trade group that represents Black real estate professionals. The group has a “few hundred” members, said one such member, Myra Lillard, chief appraiser at Home Guide Realty Services in Indianapolis, Ind.
Lillard is incensed that neither the Appraisal Institute nor the Appraisal Foundation have reached out to her group regarding minority appraiser recruitment. The Appraisal Foundation’s recruitment initiatives include working with the real estate degree program at Fort Valley State, a historically black college in Georgia — measures Lillard called superficial.
“I guess they see possible gain and notoriety now in helping the downtrodden Black man,” Lillard said.
We are just starting our reporting on the appraisal industry, and evaluating the extent of bias claims. If you have first-hand experiences of bias, or conversely, have seen appraisers work to pro-actively reduce discrimination, please let us know. Send an anonymous email to [email protected] or [email protected].
My comment is represented in my blog post that can be seen here: https://skaptheappraiser.net/2021/06/11/the-other-side-racism-in-appraisals/
Thanks for this peek behind the curtain of appraisaldom. I’m looking forward to the next installment.