Thursday, 5 August 2021 | The Latest Buzz for the Appraisal Industry

Does Your Appraisal Data Include Racial Bias?

Racial bias has been a hot button issue within the past year in the appraisal industry. We have all heard about racial bias, but are you aware if it is in your own data? Is it possible your data is biased and you don’t know it? We will be hosting a webinar on April 27th at 1 pm, “Does Your Appraisal Data Include Racial Bias?” We sat down with one of the hosts, Kenon Chen, EVP of Corporate Strategy for Clear Capital, to dive into to this issue further and offer some insight to what can be done.

Buzz: Can we have your background in the industry?
Kenon: I have been in the mortgage and real estate industry for almost 20 years leading technology, product, and strategy teams. As the EVP of Corporate Strategy at Clear Capital, I am deeply passionate about the future of property valuation and focused on elevating the appraisal experience for homeowners, home buyers, lenders, and appraisers.

Buzz: What is racial bias and how does it relate to appraising?
Kenon: Racial bias can be categorized in three ways: systemic, implicit, and explicit. Systemic bias is related to the long-term impact of biased housing policies that are still present in the data and market today. Implicit bias describes the possible unconscious behaviors and preferences that we all are capable of having, which create unintended consequences. Explicit bias is a more deliberate choice to act on prejudice or predetermined judgement.

Over the past year, there has been increased conversation on the potential of multiple forms of bias that may exist in appraising. This has manifested in the form of borrowers raising concerns about their personal experiences, academia studying the long-term impact of previously accepted biased practices, and even the government asking for active research on the topic.

Since appraisers are specifically trained and required to maintain an impartial, unbiased approach to value, you can see why this topic is so important to explore closely.

Buzz: How could data be racially biased and we not even know?
Kenon: There have been multiple in-depth studies on the effects of the historical policies of redlining, public housing segregation, and local zoning practices. The consensus of many of these studies is that the impact of previous policies is not just in the past, but that it is still influencing the value of properties in minority communities today. For instance, Redfin just published a study showing that properties in majority black neighborhoods are valued at $46k less than a home with the same characteristics in a majority white neighborhood. Since the sales comparison approach is key to determining appraised value, any systemic impact to previous sale prices could have downstream effects on subsequent appraisals utilizing that data.

Buzz: How can diversity in the trainee pool help combat the issue of racial bias?
Kenon: I love the saying that diversity reduces blind spots. We all have unconscious biases from our own experiences, so having people in the appraisal profession that reflect the rich diversity of homeowners in the U.S. can only be a positive thing. Diversity is not just about race, but also about being inclusive of all people into the next generation of appraisers. And as the Appraisal Institute has clearly communicated the importance of counteracting the decline in the number of appraisers, I believe that increasing diversity is an important part of this strategy.

Buzz: Why should appraisers attend this webinar?
Kenon: Well, speaking of diversity, I think this webinar is a rare opportunity to hear from three appraisers with diverse backgrounds that not only care deeply about the appraisal profession, but also care deeply about people. It’s important to recognize we don’t think the appraisal profession is made up of racists. Rather, this is a nuanced topic that requires as much soul searching as it does data analysis, so a thoughtful approach matters. The webinar is an opportunity to gain some new insights on how to explore this topic and how to analyze your own data approach for potential bias.

We want to thank Kenon Chen for answering our questions and we look forward to seeing him with his other hosts John Brenan, Jillian White, and Jessica Brown.  We hope to see you April 27th at 1 pm for our webinar, “Does Your Appraisal Data Include Racial Bias?”

Responses

  1. We have heard for the past year-and-a-half now about following the science. Are there arguments about what science was correct, wrong and/or misleading? Yes. It is a fact that science can be manipulated to show what you want. That is why we need to follow the data. I as an appraiser follow the data, it does not lie. I have no racial prejudices or any hidden agenda at all, I just follow what the market tells me. If you’re saying a house in a particular community consisting of more African-Americans is valued at $46,000 less than a similar home in a majority white community, what are the other parameters in this study that are being looked at? Is it an identical house, identical age, same amenities, same upgrades? What about access to certain things (work, shopping, etc), what about demand, are people moving into this market area/community and for what reasons, what about the school system, etc, etc? So most likely it is not the “same” house, so you can NOT compare a home based on one factor, racial make up of the community and just make a broad assumption based on one factor and one factor only. It is impossible. Wouldn’t that be discrimination in of itself? As all of us know, there are so many other factors that go into coming up with an appraised value of a property, but we should always follow where the data leads us. Let’s find out what is really broken in the profession and how we can solve it. We’ve got to stop looking for a Boogeyman behind every corner and making excuses and downgrading ourselves and our once proud profession. We don’t all have these biases that we are now being told we do, and additionally told that we now don’t even know about them. We have all been told that we need to be a color blind society, and for the most part we have become that. This is the most diverse country on the planet, let’s celebrate that and move forward, not backwards. Bu they want to tell us that we now are not, and that we have hidden biases toward certain people that will never go away? Come on people don’t let fear overtake you, treat others the way you would want to be treated, appraise the house, look for comparables in the community, analyze the market area, and analyze the data and report it. It’s that simple!

  2. After reading this, I feel that I have already wasted enough time. If you’re serious about this then I think every appraisal assignment should include for the seller, Buyer, realtors involved disclosure of their actual race, any race they perceive themselves to be, their sex as they were born and assigned, sex as they identify now, any gender they presently or formally identified as etc. I think we might as well cover the sex now because that will come up after the race. I almost forgot about sexual orientation add another line for that.

Welcome

Need Help?

Our knowledge base will help you and find the answers you're looking for.