In early November, the National Community Reinvestment Coalition (NCRC) filed two complaints against appraisers with the Department of Housing and Urban Development asserting different treatment based on race in violation of the Fair Housing Act.
- The first complaint, against RMC Appraisal Services, asserts different service levels based on race; and
- The second complaint, against Atlantic Appraisers & Associates, addresses home valuations that differ based on race.
Mystery Shoppers
The Complaints evolved from mystery-shopping regarding appraisals conducted by the NCRC. The tests were conducted in the Baltimore, MD area in 2021 and 2022. The testers were four interracial couples—Black/White couples. Two or more appraisals were conducted of each of their homes. In some cases only the Black spouse was present for the appraisal and all indications that a White individual lived in the home were removed. In the other cases only the White spouse was present for the appraisal and all indications that a Black individual lived in the home were removed.
Different Service Levels
In the RMC complaint regarding different service, the NCRC asserts:
- An appraisal of a home presented as being owned by a Black individual was performed on April 14, 2022.
- On April 26, 2022, the NCRC employee who ordered the appraisal called the appraiser and left a message inquiring when the appraisal report would be received. The call was not returned,
- The appraiser never contacted the homeowner regarding the status of the appraisal report, and
- The appraisal report was provided on June 28, 2022.
- RMS was also engaged to perform an appraisal of a home presented as being owned by a White individual on June 14, 2022.
- The appraiser emailed the homeowner on June 23, 2022, to advise that the appraisal report should be ready by the beginning of the next week.
- The appraisal report was provided on July 1, 2022.
Different Valuations
In the Atlantic complaint regarding different valuations, the NCRC claims:
- It ordered two appraisals of the same home from different appraisers during November 2021.
- In one appraisal, the home was presented as being owned by a Black individual and the appraised value was $310,000.
- In the other case, the home was presented as being owned by a White individual and the appraised value was $350,000.
- In June 2022 it had two additional appraisals of the home performed, with appraised values of $370,000 and $380,000.
- In August 2022 the NCRC engaged the appraiser that is the subject of the complaint and another appraiser to perform appraisals on another home.
- In the appraisal performed by Atlantic, the home was presented as being owned by a While individual and the appraised value was $553,000.
- In the other appraisal the home was presented as being owned by a Black individual and the appraised value was $507,000.
- Four additional appraisals of the same home were performed, and that range in the five valuations performed by other appraisers was $460,000 to $510,000, with the $553,000 valuation by Atlantic being the last and highest of the appraisals. The report does not indicate whether the home was presented as owned by a Black or White individual for the other four appraisals.
- The NCRC asserts that the appraiser that is the subject of the complaint rendered higher valuations if a home was presented as being owned by a White individual.
Recommendations
The NCRC recommends that the industry:
- Conduct more testing of appraisers. The NCRC notes that the tests it conducted were limited to comparing appraisals with Black and White homeowners, and that tests can be expanded to include Latino and Asian homeowners.
- Create incentives for the appraisal industry to recruit a more diverse appraisal pool. The NCRC cites the Bureau of Labor Statistics in noting that 97.7% of real estate appraisers are White, and that 69.6% are men.
- Require appraisers to report the demographics of their clients and the values they assign to clients’ homes.
- Create a more meaningful reconsideration of appraisals process.
- Require fair lending training as part of the licensing process.
- Increase funding for enforcement resources.
- Create industry standards for fair appraisals.