Are Appraisals and Assessments Biased?
Racial bias in home appraisals and assessments is not just an anecdote. Norm Miller (University of San Diego and Homer Hoyt Institute), Ruchi Singh (University of Georgia), and Richard K. Green (USC Lusk Center for Real Estate) discuss the statistically significant racial and ethnic biases in appraisals and tax assessments.
Miller details the validity of recent analysis on valuation gaps from Freddie Mac as well as the benefits of automated valuation models. He also cautions that using machine learning without human oversight of variables can result in a different set of biases.
Singh shows how assessments are regressive, often resulting in a mismatch of a lower property value with higher property taxes. She also points out contributing factors, including why excluding information like nearby schools or the condition of the home can set the assessments in opposition to appraisals.
More from the discussion:
- How to make the assessment process fairer
- The importance of loan-to-value ratios in underwriting
- Pressure appraisers face in avoiding errors
- Why short-term and long-term appraisal models will be required to avoid bias
- New York Times Story: Home Appraised With a Black Owner: $472,000. With a White Owner: $750,000.
- Freddie Mac: Racial and Ethnic Valuation Gaps In Home Purchase Appraisals
- William Sprigg’s Lusk Perspectives: Racial Justice and Economics: A Crucial Pairing
- Freddie Mac’s Appraisal Institute Diversity Initiative