Learn About Appraisal Bias

Accounting for the breadth of the literature, evidence suggests that racial and ethnic bias has been a contributing factor to the depressed values that appraisers in purchase transactions assign to properties in majority-Black and -Latino neighborhoods. Evidence also suggests that racial and ethnic bias affects refinance valuations as well. Via this mechanism, Black homeowners today are losing wealth-building potential in part because of the perpetuation of historical discrimination and segregation.

Property appraisals used in real estate transactions and mortgage lending are not the only valuations that may be vulnerable to racial and ethnic bias. Many jurisdictions generate revenue through a property tax that is based on a home’s assessed value.

As with property appraisals, there is a legacy of racial discrimination in property tax assessments, though it is driven by different factors than those of residential lending valuations. This effect has taken the form of systemic relative overassessment of Black-owned properties and neighborhoods for taxation, and therefore relatively higher tax burdens.

The increased costs of higher tax burdens may be capitalized into lower sales prices. This may result in lower market value in historically marginalized neighborhoods, thus piling on to the apparent impact of racial and ethnic bias in mortgage transaction valuations. The Task Force has focused on appraisals performed in support of residential lending but is aware that appraisals are not the only form of property valuation that affect communities of color.