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Takeaways:
- Seek out the lender’s policies for preventing and addressing bias in appraisals, criteria for selecting appraisers, and whether they require fair housing and implicit bias training.
- Provide the appraiser with relevant objective property data such as records of recent renovations and be available to answer questions about the property.
- Inform the consumer about requesting a reconsideration of value from the lender if information is incorrect or if relevant comparison data was not considered during initial appraisal.
- If improper bias is suspected, contact the Appraisal National Complaint Hotline (877-739-0096), or file a complaint directly with HUD, the Consumer Financial Protection Bureau, state appraisal licensing and regulatory boards, or local housing civil rights authorities.
- As REALTORS®, including appraiser members, commit to upholding the REALTOR® Code of Ethics and Article 10’s prohibition from denying equal professional services or discriminating against any person based on race, color, religion, sex, disability, familial status, national origin, sexual orientation, or gender identity.
Two Northern California homeowners entered a settlement agreement with an appraiser and her appraisal company in a lawsuit alleging racially based discrimination in the appraised value of their home. The African American homeowners, who were attempting to refinance their mortgage, alleged the unreasonably low appraisal caused losses due to less favorable interest rates based on a second appraisal reaching a higher number just weeks later after the homeowners erased evidence of their racial identity. The monetary amount of the settlement was undisclosed; however, terms of the agreement required the appraiser to attend discrimination training and watch a television documentary chronicling the couple’s case.
The homeowners purchased the property in 2016 for $575,500. After several separate renovations, the house was appraised at $864,000 in 2018 and $1,450,000 in 2019. In 2020, the homeowners sought an appraisal to refinance their mortgage to renovate the basement. The Defendant appraiser inspected the house and reached an appraised value of $995,000. Weeks later, the homeowners arranged another appraisal through a different appraiser entity. Prior to the second appraisal, the homeowners “white-washed” the house, removing all African American art pieces and family pictures. The couple replaced their effects with pictures of a white family. They asked a white friend to answer the door and remain present during the appraisal. Neither homeowner was present for the second appraisal, which returned a value of $1,482,500 – a figure $487,500 higher than the Defendant’s appraised value. Between the two appraisals, interest rates rose significantly causing Plaintiffs to secure a higher interest rate than if the second appraisal occurred one month earlier. The homeowners filed suit against the appraiser and her real estate appraisal company, alleging race was a motivating factor in the valuation of the house in violation of the Fair Housing Act (FHA) and related federal and state laws.
In addition to alleging Plaintiffs’ race was a motivating factor in the unreasonably low valuation, Plaintiff’s complaint alleged the valuation was influenced by the appraiser comparing their property to non-comparable homes recently sold in Marin City, an unincorporated area within Marin County, with a large concentration of black residents. Plaintiff’s alleged that the appraiser failed to select more analogous houses because the racial demographics of the surrounding areas were different. Plaintiffs further asserted that the appraiser opined their house was worth 28% less per square foot than the comparable properties outside of Marin City. They alleged that the appraiser’s methods of valuation had a disparate impact on African American homeowners.
To state a claim under the Fair Housing Act (FHA), a plaintiff must allege they are an aggrieved person who was subjected to an alleged discriminatory housing practice. A plaintiff can establish an FHA discrimination claim under a theory of disparate treatment or disparate impact. In response to the Complaint, Defendants moved to dismiss Plaintiffs’ claims based on limitations to the Fair Housing Act’s applicability, however the U.S. District Court for the Northern District of California held that an appraisal is within the FHA’s definition of a real estate transaction, the appraiser knew the Plaintiffs’ race based on the home’s décor, and the allegations sufficiently alleged Defendants interfered with Plaintiffs’ enjoyment of their home by discriminating against Plaintiffs in making her low appraisal. The Court also held for similar reasons that the Plaintiff’s claims under the Civil Rights Act and California’s Unruh act which both require equal service to all persons regardless of race would not be dismissed.
Following the above motions to dismiss and other proceedings, the parties entered a settlement agreement for an undisclosed monetary amount, however the terms of the settlement required the appraiser Miller to watch a television documentary about the Plaintiffs titled “Our America: Lowballed" and attend a training session on the history real estate discrimination.
Tate-Austin v. Miller, No. 21-CV-09319-MMC (N.D. Cal. Apr. 13, 2022)
