Paul Austin and Tenisha Tate-Austin spent three years renovating their home in Marin, CA, so when they had their home appraised in 2020, they had high hopes it would be valued at a high price.
So when the appraisal came in low, the couple wondered: Might racial bias be to blame?
To find out, they removed all details of their home that indicated that they were Black, including artwork and family photos. Then they had a white friend pose as the owner for a second appraisal. This time, the home was appraised at $1.4 million—nearly a half-million higher than before.
The couple have since filed a lawsuit in federal court arguing that racial discrimination in their first home appraisal violates the Fair Housing Act.
“We shouldn’t have to go through this,” Paul Austin told CNN. “We shouldn’t have to have our White friend standing in.”
Their story has also raised alarm bells about racial bias in home appraisals that might make you wonder: Might you end up a victim of a biased home appraisal, too?
Why home appraisals matter
In theory, a home appraisal is an objective, unbiased estimate of a home’s value—based on comparable homes in the area, renovations the homeowners have done, and other concrete variables. Yet as the above story makes all too clear, home appraisals can vary widely based on who’s doing the appraising—and whose home is being assessed.
Currently, cases of discriminatory appraisals stem mainly from “race and ethnicity,” says Amy Nelson, executive director of the Fair Housing Center of Central Indiana. However, “we are certainly also aware of discrimination occurring in other ways, such as against the LGBTQ+ [community] and persons with disabilities.”
Appraisers, by law, are prohibited from basing their home valuations on the sex, race, religion, handicap, or other protected classes of the owner, according to the Appraisal Institute in Chicago. But sometimes, human beings do vary from this code.
If you are concerned that you might fall victim to a biased home appraisal, these guidelines can help curb those risks.
Purge your home of personal items
Regardless of your minority status, “most real estate agents advise their clients to completely depersonalize their homes,” says Michelle Hirsch, president of the Michelle Hirsch Group with Keller Williams in Los Angeles.
“This means removing all family items and photos so that potential buyers can see themselves in the home, rather than being distracted by the lives of the previous owners,” adds Hirsch.
And odds are, if you’ve already wiped the slate clean for potential homebuyers, your home will be in good shape for the appraisal, too.
“Your home should be in a neutral state already by the time the appraisers come in,” Hirsch continues. “It keeps appraisers from being distracted by details that have nothing to do with the value of the home.”
Don’t attend the appraisal in person
Hirsch advises home sellers to not be present during an appraisal.
“Let your agent handle the appraiser,” she says. “In an ideal world, the owner would never meet the appraiser. Your agent should be used to dealing with appraisers. They will come prepared with comps and know how to present them tactfully. They will never say anything that could accidentally throw the appraisal off.”
Hirsch shares an example of what a homeowner might say that could wind up lowering an appraisal: “We spent a lot of time and money adding this extra bedroom and bath. Even though it wasn’t permitted, we think it adds a lot of value to the home.”
Think your appraisal was unfair? What to do
While those steps are surely helpful, what if you have an appraisal that you think has been swayed by bias?
“Anyone who believes a home has been improperly appraised, or that bias was involved, has several options,” says Appraisal Institute President Rodman Schley. “Specific laws have been passed, and agencies have been put into place to help negotiate them. Lenders are aware of this and should be willing to cooperate. After all, it’s best for all involved if a solid loan goes through.”
Here are the steps to take.
Step 1: Ask for a review of the report
If you’re selling your home, work with your listing agent to contact the lender to politely make it aware of comps in the neighborhood and other assets that your appraiser might have overlooked. Sometimes just the mere mention of the word “discrimination” can be enough to get the lender’s attention. If you are refinancing, you can speak directly with your lender representative about this matter.
Step 2: Request a second appraisal
Again, it’s a good idea to work with your listing agent to see if a second appraisal can be arranged. Be aware that you, as the seller, might be obliged to cover the cost of the second appraisal, which typically ranges from $300 to $450 for a single-family house. Still, hopefully, at this stage of the game, the buyer, seller, and lender are all so invested in the transaction that the expense and hassle will seem minimal just to close the deal.
If the appraisal in question is related to a home improvement loan or a refinance, check with your lender. Your lender may or may not allow a second appraisal. If it is permitted, you will likely be on the hook for the fee.
Step 3: File a complaint with your local fair housing agency
Fair housing agencies have a staff on hand to deal specifically with these types of issues. A quick keyword search for local fair housing agencies should help you get in touch with the right people.
Nelson adds that it’s extremely important to “document all your efforts and keep copies of all correspondence together.”
Step 4: Contact HUD
The U.S. Department of Housing and Urban Development has an interagency task force that deals with mortgage processing issues like lender “reconsideration of value,” and an appraisal appeal process. HUD is also involved with finding creative approaches to financing underserved markets, which might be very helpful.
Step 5: File a complaint with the state appraisal board
States issue several types of licenses and certifications for appraisers, and the vast majority of lenders use licensed and/or certified appraisers. This might not be an immediate solution, but it could be useful down the road if you decide to file a lawsuit.
Step 6: Hire an attorney who specializes in fair housing issues
This is usually the last option, as it’s likely the most expensive and time-consuming. However, if you feel you have no other recourse, you might find it’s a viable alternative. Search for and retain a lawyer who can help you seek justice. Your efforts might help not only your own cause, but also generations of homebuyers to come.
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