Saturday, 18 September 2021 | The Latest Buzz for the Appraisal Industry

Increasing Diversity in Appraisal Profession. . .

The Urban Institute recently released a blog post entitled – Increasing Diversity in the Appraisal Profession Combined with Short-Term Solutions Can Help Address Valuation Bias for Homeowners of Color.

This article addresses several issues with the real estate appraisal profession that are worthy of further examination and comment.

  1. The article accurately notes the lack of diversity in the appraisal profession. This comes as no surprise, especially when considering the article also notes an overall lack of diversity in the real estate sector.

When I first entered the profession 43 years ago, there were several avenues in the way it was accomplished:

a. through the family business,
b. acquiring a position in a financial institution, or
c. being an existing realtor.

I understand that “a” is still a large part of the equation today, especially as it relates to residential real estate appraising. I entered the profession through a financial institution, however, that paradigm shifted significantly over the last 20 years or so as many lenders have gone to the third-party appraisal management company model. Also, there was a time that in order to appraise property in some states, one needed a realtor’s license.

The point I am making here is that unless one was in group “a,” you did not grow up wanting to be a residential real estate appraiser, let alone know what one is and/or does. Unlike knowing about lawyers, doctors, accountants, firemen, and others, nobody really knows about a career as residential real estate appraiser. To reiterate, it should come as no surprise there is a lack of diversity in the industry.

Does that need to change? I will answer it with an emphatic YES! How to accomplish it is another issue. Instituting programs such as the one between Fannie Mae, the Appraisal Institute, and the National Urban League is helpful, however, it currently lacks the scale required to truly make an impact, though it is a start. There needs to be a concerted marketing effort regarding career opportunities as a real estate appraiser.

  1. The article also addresses a flaw in the current licensing system for appraisers, primarily the supervisor-trainee model. This is problematic for all new entries into the profession, though it can be particularly hard for minorities. While there are some supervisors that do not want to train their competition, the main concern is will it be economically feasible to bring on a trainee. As we all know, the real estate market is cyclical while there may be plenty of work today what happens when there is little work tomorrow. Most independent fee appraisers work on very small margins.

In the past, financial institutions were a viable training ground. Anecdotally, I hear that some lenders are returning to the “in house” model, but I am not aware of the scale of it at this point.

This is a difficult problem to solve. Personally, I do not favor the watering down of requirements, but that is not to say there cannot be a better mouse trap. Perhaps the whole licensing system as it exists today needs to be reexamined. For example, it is hard to believe that there is not one requirement in “Qualifying Education” for a course or otherwise which teaches an appraiser how to inspect a property. Being able to identify components of construction as well as their condition and recognizing when to recommend other professional inspections is a fundamental part of an appraisal.

  1. The article states “research suggests that appraisers continue to use the neighborhood’s racial or ethnic composition to identify comparable homes.” I have no idea what “research” they are referring to and how they come to that conclusion. That is not a proper way to select comparable properties in any neighborhood. I took my first appraisal classes in 1978 and one of the first things I was taught was that racial composition of a neighborhood was not a factor to consider when appraising a property. Made sense to me and I believe to many who have come along since. That is not to say there are not bad actors with biases in the profession – it is a societal issue and appraisers are part of society like all other professions.

However, to suggest that ALL appraisers follow that thinking when selecting a comparable for an appraisal in a minority community is totally misplaced and incorrect.

For more than twenty years, the top problems with appraisals identified as being deficient have been comparable selection and adjustments to the comparable for appraisals in ALL markets regardless of racial or ethnic composition. The unfortunate thing is that whether it is incompetence or biased based, the result is the same.

There can be many neighborhoods with different price points based on things such as the property condition and quality. Perhaps one neighborhood may have easy access to public transportation versus one that does not. These are characteristics that affect price and are some of the types of things an appraiser considers. As with all real estate, the final price reflects what someone is willing and can afford to pay. This is true of all communities regardless of racial or ethnic makeup.

I understand the effects and legacy of the scourge of redlining. How it impacted those communities and still does to this day. But the current narrative to lay blame at the feet of today’s appraisers is, in my opinion, a bit short sighted.

Lastly, there are certainly issues which need solutions. I do not know or have all the answers. One thing I do know is that we must come together for meaningful dialogue and communication to arrive at solutions for issues affecting us all. I welcome additional dialogue along those lines.

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Responses

  1. As a “person of color” (black) I would like to say that I hope this conversation and topic soon goes into a corner and dies. Sickening SJW creeping into our industry and gas lighting everyone. I know appraisers from 10 different ethnicities and these topics and conversation don’t even exist. Your projected paranoia is not the same as Racism or “bias”. Appraisals are a science not an art, remember? Bad appraisals can be addressed on a case by case bases, and an anecdotal instances of differing second opinions should not be inspiration for this ongoing ridiculousness.

  2. I agree with Mr. Murphy regarding “research suggests that appraisers continue to use the neighborhood’s racial or ethnic composition to identify comparable homes.” Research conducted by myself over the past 42 years suggests appraisers do not use the neighborhood’s racial or ethnic composition to identify comparable homes. To suggest racial and ethnic bias is a slur on our profession. How about research that indicates facts not suggestions? The Urban Institute is just another liberal think tank. Next thing you know they will be advancing “woke mathematics” to help create equity in appraisals. Watch for it!

  3. I would agree certain professions allow a transition into appraising. But then how does one become a plumber, electrician?
    As for this bogus racial bias woke crap…..I can relay a neighborhood by me where a difference of 4 blocks means values at 160,000 or values at 650,000. Am I supposed to go 4 blocks away and appraise a clearly 160,000 property at 650,000? This ironically was done back in the “good old days”, 2000-2008 and we all know what happened.
    I have never and it’s beyond me to think any Appraiser would intentionally provide a lower value because of the make up of the neighborhood. When I do a comp search in the subject’s clearly defined neighborhood I see addresses….I don’t see color. End of the story.

    1. Agreed the color of the occupant is not a characteristic of the real estate. Also experience is education and is important to the process. The current trainee/supervisor requirement does have its challenges. Perhaps there is a better way.

  4. Actually there are many appraisers, such as myself that did not become one through A,B or C. Over 30 years ago, I saw a three line ad in the newspaper saying “Learn to be a real estate appraiser, big bucks, easy work” or something to that effect. I signed up, took the eight, 8-hour courses and “graduated” as a CREA. That, at the time stood for Certified Real Estate Appraiser. This was well before licensing and anyone could call themselves that. I took out the phone book, remember those, and proceeded to send out dozens of flyers and post cards to mortgage brokers. Got lots of calls, saying, great, we need an appraiser and then was asked “Who are you approved with”. Something my instructor kinda failed to mention in the courses. I had to say, well no one and then was told well when you are call us back. I was able to finally get a call and the mortgage broker, Sampson, was his name asked if I went to Indio, about 35 miles from me and I said sure and he said well he could not find anyone else to go and gave me the order. I muddled through it and, after a review, since I was not on the lender’s list, it went through. Bingo, I was now approved with one lender and long story, not really short, I had someone’s name to put on my resume. The point of this is, I pursued and stuck with it, all on my own. I have never worked for a lender as a staff appraiser and have been an independent, fee appraiser my entire career. This can still be done, especially with licensing. I have several clients that ask me if I know of any trainees that want to come on board with them. I personally have trained four appraisers and feel I have done my part. As far as racial bias and choosing comps this way, I would not know how to do that. No data base for sales and listings that I know of lists the race. The comps are what they are. I quite often tell the borrower, I don’t appraise your house, your neighbors do that. I, along with I’m sure most of you have seen the stories about an appraisal done and then another one that came in $100,000 higher after all items were removed from the house that would reflect the ethnicity. Maybe there was bias involved, but I would really like to see both appraisals, before I judge them. Yes, I agree, let it die.

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