Homes in Black and Latino neighborhoods more likely to be under appraised, data shows

CHICAGO (WLS) -- If you're looking to sell your home or refinance, the racial demographics in your neighborhood could impact your appraisal.

The ABC7 data team examined millions of federal mortgage loan records from 2018 to 2020.

The records show that appraisers more often make lower home value estimates in neighborhoods where a majority of residents are people of color.

Nationwide, homes sold in neighborhoods with 50% or more Black residents are 2.5 times more likely to be under-appraised by at least 2% than those in mostly white neighborhoods.

When a tract is 80% Black, under-appraisals are 2.75 times more likely than in mostly white areas.

In Cook County, about 120 out of every 1,000 homes sold in mostly Black neighborhoods were under-appraised compared to approximately 102 in mostly Latino or Hispanic neighborhoods, and about 70 per 1,000 sales in mostly white neighborhoods.

For Chatham homeowner Christopher Hicks, the data isn't surprising based on his own experiences with home appraisals.

"It is unfortunate. Something needs to be done," he said.

Illinois Realtors developed a task force last year to study racial bias in home appraisals and to develop policy solutions.

"It's important to understand the scope of the problem in the sense of the impact it can have on homeowners. It robs so much wealth from our neighborhoods," Illinois Realtors CEO Jeff Baker said.

Jody Bishop heads the Appraisal Institute, the nation's largest professional association of real estate appraisers.

"We learn all about the homeowner's property and then we use comparable sales. And those are recent sales that are similar to that to come up with a conclusion of market value today. So what we do is we use the facts," Bishop said.

However, Bishop admits the lack of diversity among appraisers could color how homes in certain neighborhoods are valued.

In Illinois, 92% of appraisers are white, 4% are Black, 3% are Hispanic or Latino and 1% are Asian, according to data obtained by the ABC7 data team.

"So we need to educate our appraisers on the fact that there could be things they see in a neighborhood that make them feel like it's not real good," Bishop said.

Marcus Knight is an appraiser trainee.

"I don't think people are going in and saying, 'Hey, look. I want to screw this person over.' Their license is on the line. Their livelihoods are on the line," Knight said. "I think what's probably happening is people are going into these areas they don't have market competence."

And that could be costing Black and brown homeowners a return on their investment.

"A series of appraisers working in that one community not understanding the community can impact a community over time, for sure," Knight said.

There are programs to bring more people of color into the industry.

However, Knight believes the best line of defense for homeowners is information.

"You can always ask for a revision of the value that was given on your home and that would actually call for them to do more research," he said.

If you believe you are a victim of home valuation discrimination, you can file a complaint with the Illinois Department of Human Rights. You must file your complaint within a year of the incident.

Watch "Our America: Lowballed" beginning Dec. 2 wherever you stream: Fire TV, Android TV, Apple TV and Roku.