Learn about appraisal bias by listening to diverse perspectives, viewing helpful resources, and reading news stories.
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Introduction to Appraisals
An appraisal is a point-in-time opinion of value. In order to issue a home loan, the lender (typically a bank) must conduct an appraisal to determine the value of the home they will finance under a home mortgage loan (for a purchase or refinance transaction). Simply put, the bank needs to know how much money the home is worth.
The appraiser’s scope of work typically includes:
- the type of property inspection (interior, exterior only, or no inspection);
- what approaches to value are required (sales comparison, cost, or income); and
- any lender-specific requirements.
Appraisals are important because they affect how much people make when they sell their home, how much people pay when buying a home, and how much equity people can pull out of their home when refinancing.
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.
White House Event: Rooting out Appraisal Bias
Rooting out Bias in Home Appraisals: The PAVE Task Force Action Plan to the President
The White House
View Trainings and Other Resources
View past training webinars about appraisal bias. More resources coming soon.
HUD Webinar July 29, 2021
Advancing Equity in the Appraisal Process
A panel of experts from HUD, Urban Institute, Brookings Metropolitan Policy Program, Zillow, the National Association of Hispanic Real Estate Professionals, and the National Fair Housing Alliance (NFHA) discussed how to advance equity in the home appraisal process.
HUD-NFHTA Webinar June 1, 2021
Collateral Damage: The Consequences of Racial Bias in the Residential Appraisal Process
The National Fair Housing Alliance (NFHA) partnered with the National Fair Housing Training Academy (NFHTA) to host a public forum that explored how fair housing laws can be used to challenge discriminatory appraisals and help build wealth in communities of color.
HUD-NFHTA Webinar September 15, 2021
Strategies for Investigating Discriminatory Residential Appraisals
The National Fair Housing Training Academy (NFHTA) and the National Fair Housing Alliance (NFHA) hosted a public forum focusing on understanding the fundamentals of the appraisal process, comprehensive strategies and approaches to conducting appraisal bias investigations, and exploring discriminatory impact and treatment theory in appraisal investigations.
Read About Appraisal Bias In The News
The articles below are from third-party sources not affiliated with PAVE or HUD. The views and opinions expressed do not represent the U.S. Government.
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