Appraisal Hell

ACORN ACORN International

\New Orleans      Finally, one of the deep, dark secrets of home ownership and home buying is coming to light – the mysterious, highly subjective, largely unregulated world of real estate appraisers.  For those lucky enough to own a home, whining about appraisals and in fact arguing about values assigned to property seems somehow inappropriate.  Whining about tax assessments, well, hey, that’s part of what makes us Americans.  Actually, ever getting a reduction in tax assessments, well, hey, that would define whether you are one of the elites.  But appraisals when buying or selling, for most of us who have ever had the experience, it’s a root canal in a series of humiliations at the hands of the banking industry as you try to buy a house and part of the “unfathomable mysteries of life.”

Except now, maybe there’s some light at the end in this tunnel as the level of racial and neighborhood discrimination is getting attention as a long unenforced violation of the Fair Housing Act.  Stories in the New York Times from upper middle class African-Americans who had caught appraisers in blatant discrimination over their multi-racial families or direct ownership, proved that appraisers lowered the value of the house solely based on race.  Even comedian D. L. Hughley was part of the tale of being on the wrong side of a racist appraisal.

Appraisers are licensed.  They have to take tests, but the questions are all about the arcane issues of home construction, materials, and comparable values.  None have to do with subjective or personal opinions, but in a world of close calls, the opportunities are huge.  It also seems a wink-and-nod business.  Real estate brokers have favored appraisers that they “can work with,” meaning that will give them a shake to get the value high enough to pass muster on the loan.  In my early days as an organizer in Arkansas, I had hundreds of cups of coffee with a seasoned veteran politico who had run Wilbur Mills first victories in politics. His means of earning a living between campaigns were obscure, until I figured it out.  He was licensed as an appraiser, so was called to duty by elected officials anytime they needed property valued for zoning, condemnation, and so on, all of which was legal and no bid, but greased to the gills.

The problem with reforming the appraisal process has never been a lack of victims, but real avenues to win enforcement and penalties.  A prospective homeowner can file a complaint with HUD, but that might sour the efforts to get a loan or make a sale with the bank and seem like sour grapes and self-interest unless proof is airtight.  All of which leaves state boards self-regulating, and resistant to accountability and change.   Zillow, Redfin, and others using comparable computer programs offer some external hope, but they also have an interest in putting a digital finger on the scale.

The only thing that is clear is the problem.   Several years ago, the House Financial Services Subcommittee found that a home in a majority Black neighborhood is likely to be valued at 23% lower than an identical home in a white majority area, costing Black homeowners $156 billion in cumulative losses.  Now, we need them to do something about this that makes this right.