Home appraisals in Black neighborhoods affected by lack of diversity in appraisers, studies find

Leah Hope Image
Wednesday, February 2, 2022
Lack of appraiser diversity affects home values in Black neighborhoods
Home appraisal in Black neighborhoods can undervalue houses by thousands because of lack of appraiser diversity, studies have found.

CHICAGO (WLS) -- When a family friend considered selling their South Shore home, Andrew Howard knew he had to make an offer.

"Beautiful lake views," he said. "You can look out any window in the back of our home, even the side of our home. It's like a soundtrack, you can hear the waves."

After a few years in their new home, the Howards wanted to do renovations. They got an appraisal to refinance their mortgage. The appraiser, Howard said, was white and based out of the north suburbs.

South Shore is a predominantly African American neighborhood in Chicago, and the appraisal seemed low. They appealed and the lender approved a second one. This time, the appraiser was African American.

The first appraisal was for $450,000; a month later, Howard got a second appraisal at $563,000, or $113,000 more.

"It's almost like you're being robbed. It's completely unfair, but it's so common," he said.

According to the 2019 U.S. Census 5-year American Community Survey, in the Chicago area 5% of appraisers are African American, 3% are Latino, and 1% are Asian, while 90% are white.

"It's very lopsided in terms of the makeup," Howard observed.

A 2018 analysis by the Brookings Institute called "Identifying Bias and Barriers, Promoting Equity," of the property appraisal industry nationally included an estimate that "homes in majority Black neighborhoods were undervalued by $48,000 per home on average."

The analysis also points to the impact on generational wealth, as "homeownership is considered one of the cornerstones of wealth." According to 2020 data from the Federal Reserve, 29.9% of white families left inheritance while only 10.15 of African American families left inheritance.

"If each individual or individuals in that area all are facing a loss of wealth to an appraisal that doesn't come back correctly, when you accumulate that it actually becomes a significant problem across our community," said Lutalo McGee, chair of the Illinois Realtors Discriminatory Appraisal Task Force. "To know that these things are still in play that aggravate that wealth disparity is extremely challenging."

McGee is willing to take that challenge on. Her organization is now educating realtors, helping more people of color become appraisers, and working with legislators to change policy and laws to prevent discrimination.

Neighborhood Housing Services urges homeowners to prepare for an appraisal with a list of comparable properties, or "comps," nearby that you feel are similar to your home and a list of amenities unique to your property and qualities that add value to your home.

"We've been working with some lenders to change this at a systemic level," said Sarah Brune, Neighborhood Housing Services. "There are many who are seeing this consistently and they do want to make change."

Ultimately, getting a fair appraisal is up to the appraiser and there are efforts to improve diversity in the industry. For instance, the Appraisal Institute said they are helping to recruit appraisers and educate members about potential bias.

"I just want people to be more aware that these things are happening, that these values they are just suppressing the growth of our community," Howard said.

Howard successfully got a "reconsideration of value" and was able to refinance his home. Renovations start this spring to protect his investment for generations to come.

Additional Resources

Appraisal Equity Campaign: Share your story

Neighborhood Housing Services of Chicago Policy Updates

Illinois Realtors Discriminatory Appraisals Taskforce

Chicago Association of Realtors - Share your story