Ensuring Impartial Appraisals in Real Estate

Introduction

• Importance of impartial and objective appraisals in real estate transactions (buying, selling, refinancing)
• Appraisals provide independent estimates of market value
• Critical for successful deals

Legal and Ethical Requirements

• Appraisers must be impartial, objective, and independent
• Compliance with laws and regulations including fair housing laws

Racial Bias in Appraisals

• Reports of black homeowners receiving low initial appraisals
  • Higher appraisals obtained after removing personal effects
• Federal Housing Financing Authority's review indicated potential race-related bias
• Formation of interagency task force "PAVE" (Property Appraisal and Valuation Equity)
  • Aims to eliminate racial and ethnic bias in appraisals
• March 2022: PAVE released an action plan
  • More details available on PAVE’s website and nar.realtor

Realtor Responsibilities

• NAR code of ethics prohibits discrimination in providing professional services
  • Protected categories: race, color, religion, sex, disability, familial status, national origin, sexual orientation, gender identity

Recommendations for Realtors

1. Selecting a Lender

   • Advise clients to inquire about lender policies on bias prevention and addressing
   • Ask about criteria for selecting appraisers and training on fair housing and implicit bias

2. Providing Information to Appraisers

   • Share relevant and objective property data, including comparable sales
   • Be available to answer questions to avoid misinterpretation of influence

3. Reconsideration of Value

   • Inform clients they can request a Reconsideration of Value (ROV) if incorrect information is found

4. Appraisal Review

   • If ROV is ineffective, request an appraisal review from the lender
   • Conduct a formal evaluation of the appraiser's work or obtain a second appraisal

5. Reporting Bias

   • If bias is suspected, clients can file a complaint with relevant authorities:
     • Appraisal complaint national hotline
     • HUD, CFPB, local housing, or civil rights authorities

Conclusion

• Importance of addressing bias in appraisals for fair real estate practices
• Realtors play a crucial role in ensuring impartial appraisals