firsttuesday recently asked readers: Have you or your clients experienced appraiser discrimination?

Of the 144 responses received:

  • 90% said never;
  • 5% said yes, rarely;
  • 3% said yes, often; and
  • 2% said yes, sometimes.

While the vast majority of readers have not witnessed discrimination from appraisers, a handful have firsthand experience of discrimination during the appraisal process — some of them more than once.

In fact, nationally, 12.5% of homes in Black neighborhoods and 9.4% of homes in Latino neighborhoods receive appraised values lower than the purchase price — compared to just 7.4% in white neighborhoods, according to a Freddie Mac study.

To deliver a fair and unbiased report, appraisers analyze property data on comparable properties (comps) and are required to apply uniform standards across the board on each property.

Yet, the appraisal process still relies on a significant amount of subjectivity.

Using the market comparison approach, also known as the sales comparison approach, the appraiser examines recent selling prices of nearby properties with similar characteristics to establish the subject property’s comparable value.

However, appraisers determine the value of property characteristics by pulling from a range of prices, rather than one singular, easily defined price point. It’s the appraiser who determines whether that valuation will be in the upper or lower part of that range, leaving room for implicit bias to sneak in and affect the appraiser’s valuation.

Related article:

Help wanted: diversity in real estate appraiser industry

A broker price opinion as a check

A broker price opinion (BPO) — also called a broker price analysis (BPA) — is a comparative pricing analysis, a study of market data on sales prepared by a broker or agent.

The real estate licensee develops a BPO by first downloading a property profile — title condition — on the property and a printout of recent sales in the surrounding area from a title company website.

A broker’s BPA is documented by preparing a comparative market analysis (CMA). The CMA is a worksheet used when establishing a property’s value based on prices recently paid for comparable properties. The CMA reflects observations on a visual inspection of the comparable properties, noting in each property’s column itemized features distinguishable from the subject property, and the dollar adjustment needed to correct for its greater or lesser value than the subject property. [See RPI Form 318]

In contrast, an appraiser licensed by the California Bureau of Real Estate Appraisers (BREA) writes an appraisal report to arrive at a property’s appraised value.

While the person and delivery are different, the astute broker ought to arrive at a similar figure as the licensed appraiser. However, when the figures are vastly different, this raises a red flag on the appraiser’s valuation.

Related article:

Spotting appraisal deficiencies


Anti-discrimination rules for appraisers

To prevent discrimination during the appraisal process, appraisal licensees are prohibited from basing their appraisal on:

  • race;
  • color;
  • religion;
  • gender;
  • gender expression;
  • age;
  • national origin;
  • disability;
  • marital status;
  • source of income;
  • sexual orientation;
  • familial status;
  • employment status; or
  • military status. [Calif. Business and Professions Code §11424(a)]

This applies to all individuals who may be present or impacted by the appraisal, including the property’s prospective or current owners, any tenants, or occupants of neighboring properties. [Bus & Prof §11424(a)]

To ensure compliance, as of January 1, 2022, the BREA is required to include a check box within their existing complaint form, asking the complainant whether they believe the appraisal is below market value. Further, complainants will have the option to include their demographic information on the form. [Bus & Prof §11310.3(b)]

The BREA is required to study this demographic information and provide a report of their findings to the state legislature before July 1, 2024. [Bus & Prof §11310.3(e)]

Related article:

New California law tackles bias in real estate appraisals

Homeowners, buyers, sellers and agents who believe they have been the subject of appraiser discrimination may file an online complaint with the BREA.