(LISTEN) Fair Housing Month: The Problem with Appraisals and What We Can Do About It (PODCAST)
It is no secret that appraisals can make or break deals in our industry.
I have shared firsthand accounts from sellers like these.
Plus, I personally have had to "go to bat" for clients where sizable portions and features of their homes were "overlooked" in the initial appraised value. It took weeks of back and forth, escalating to management, to get the value we knew the home seller deserved.
But who has weeks? There has to be a better way.
Less we forget, the Rev. Dr. Martin Luther King Jr.'s heinous assassination in April of 1968 ushered in the passage of the decades-long battle for more rigorous federal fair housing laws (that were vehemently opposed by many in the real estate industry, while championed by a dedicated few, what I like to call, Fair Housing DECODERS©).
More specifically, federal fair housing laws were enacted to counteract codified tenets of housing like:
1934: Hoyt’s Hierarchy (Hoyt was FHA’s First Chief Economist and set the tone for numerous housing policies) of how to value different neighborhoods, with one being the highest rating and descending from there:
1. "English, German, Scots, Irish, Scandinavians"
2. "North Italians"
3. "Bohemians or Czechoslovakians"
4. "Poles"
5. "Lithuanians"
6. "Greeks"
7. "Russian Jews of the lower class"
8. "South Italians"
9. "Negroes"
10. "Mexicans"
1967: American Institute of Real Estate Appraisers manual stated, "[The appraiser] must recognize the fact that values change when people who are different from those presently occupying an area advance into and infiltrate a neighborhood.”
Since April of 1968, fair housing laws have been assumed by some to automatically usher in the "I only see green" generation of housing -- where everyone is treated fairly based on financial wherewithal regardless of skin color, race, national origin or any other protected class based solely on an aspect of one’s humanity that is often immutable.
But in reality, there is still much work to be done.
Case in point: "And then up here, it’s getting better because of all of the Mexican people moving out…"
That was a direct statement recently (and more importantly, since the passing of federal fair housing laws) by an appraiser exercising their subjective discretion to interpret a home's value using the industry-standard sales comparison approach.
Did you catch that?
Nearly, ninety years later, this statement is a modern-day callback to Hoyt’s Hierarchy, whether intentionally or unconsciously. And, it was just one example of many (but let’s be frank that one is too many).
What other outdated tenets still permeate the thinking -- even if unconsciously -- of some appraisers and other real estate pros (from lenders to agents) and how does such thinking impact fair housing in 2023?
With April being dedicated as "Fair Housing Month", this is a great time to reflect on what still needs to be done and how we can impact positive change because fairly valued homes lead to more purchasing power and generational wealth that can be reinvested in and for the betterment of all of our communities.
For the first time ever, research using the newly released Uniform Appraisal Dataset — the most comprehensive set of market appraisals in the nation — now confirms there is indeed a problem at the appraisal stage that many of us have experienced anecdotally. One of the researchers, Dr. Elizabeth Korver-Glenn shared her take on that seminal data and where we need to go from here.
Check out this Atlanta Realtors® Rundown podcast interview (the official podcast of the Atlanta REALTORS® Association) as Dr. Korver-Glenn answers the following questions in light of this appraisal data pulled from across the U.S. (likely featuring your "neck of the woods"):
My hope is that no matter what city/town you live in, the takeaways of this podcast encourage your (continued) advocacy for fair housing, which includes fair appraisals. "That's who we R!"
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I have shared firsthand accounts from sellers like these.
Plus, I personally have had to "go to bat" for clients where sizable portions and features of their homes were "overlooked" in the initial appraised value. It took weeks of back and forth, escalating to management, to get the value we knew the home seller deserved.
But who has weeks? There has to be a better way.
But Wait -- How Did We Get Here?
More specifically, federal fair housing laws were enacted to counteract codified tenets of housing like:
1934: Hoyt’s Hierarchy (Hoyt was FHA’s First Chief Economist and set the tone for numerous housing policies) of how to value different neighborhoods, with one being the highest rating and descending from there:
1. "English, German, Scots, Irish, Scandinavians"
2. "North Italians"
3. "Bohemians or Czechoslovakians"
4. "Poles"
5. "Lithuanians"
6. "Greeks"
7. "Russian Jews of the lower class"
8. "South Italians"
9. "Negroes"
10. "Mexicans"
1967: American Institute of Real Estate Appraisers manual stated, "[The appraiser] must recognize the fact that values change when people who are different from those presently occupying an area advance into and infiltrate a neighborhood.”
Since April of 1968, fair housing laws have been assumed by some to automatically usher in the "I only see green" generation of housing -- where everyone is treated fairly based on financial wherewithal regardless of skin color, race, national origin or any other protected class based solely on an aspect of one’s humanity that is often immutable.
But in reality, there is still much work to be done.
Case in point: "And then up here, it’s getting better because of all of the Mexican people moving out…"
That was a direct statement recently (and more importantly, since the passing of federal fair housing laws) by an appraiser exercising their subjective discretion to interpret a home's value using the industry-standard sales comparison approach.
Did you catch that?
Nearly, ninety years later, this statement is a modern-day callback to Hoyt’s Hierarchy, whether intentionally or unconsciously. And, it was just one example of many (but let’s be frank that one is too many).
What other outdated tenets still permeate the thinking -- even if unconsciously -- of some appraisers and other real estate pros (from lenders to agents) and how does such thinking impact fair housing in 2023?
Where Do We Go From Here?
With April being dedicated as "Fair Housing Month", this is a great time to reflect on what still needs to be done and how we can impact positive change because fairly valued homes lead to more purchasing power and generational wealth that can be reinvested in and for the betterment of all of our communities.
For the first time ever, research using the newly released Uniform Appraisal Dataset — the most comprehensive set of market appraisals in the nation — now confirms there is indeed a problem at the appraisal stage that many of us have experienced anecdotally. One of the researchers, Dr. Elizabeth Korver-Glenn shared her take on that seminal data and where we need to go from here.
Check out this Atlanta Realtors® Rundown podcast interview (the official podcast of the Atlanta REALTORS® Association) as Dr. Korver-Glenn answers the following questions in light of this appraisal data pulled from across the U.S. (likely featuring your "neck of the woods"):
1. What recommendations do you have specifically for Realtors in regard to facilitating fair appraisals?
2. How can Realtors advocate for fair appraisal standards that are industry-wide?
3. For those that have yet to peruse this latest research, may we have a synopsis of what you discovered in regard to appraisals?
4. What do you think is the most important takeaway from your research for the public in general and also for Realtors specifically?
5. And more.
My hope is that no matter what city/town you live in, the takeaways of this podcast encourage your (continued) advocacy for fair housing, which includes fair appraisals. "That's who we R!"
Sound off - I would love to hear from you! Give me a shout on Facebook, Instagram, and YouTube. Or, get your "training on" with these on-demand classes. Here's to your success! #LearnWithDrLee #ATLRundown
