The home buying process should be black and white when it comes to numbers, but people who have gone through it often say whether the buyer or seller is black or white, or brown or straight or LGBTQ+.
There is now a concerted public and private effort to help families live the American dream of home ownership and avoid discrimination by balancing the next generation.
Part of the problem involves the appraisal process, where evidence shows that homes owned by people of color or same-sex couples are valued at far less than their property value.
“A home appraisal is basically someone else, a third party…comes out and evaluates the value of your home. And that price is essentially what you’re buying or sometimes selling the home for,” said Brian Young, co-creator of Home Lender Pal.
Young’s technology company aims to help prospective buyers hoping to be fairly approved for a mortgage so that lenders can “make the decision to approve or decline the loan without having any insight into your age, gender or race.”
The review process is necessary to get through the regulatory process, he told Yahoo News. “When you buy this house for yourself as a buyer, you have to say that this house was worth X amount of dollars.”
It’s part of a recent push to help young families avoid stories like Austin’s in Northern California, where they believe housing prices are skewed by race.
Paul Austin and his wife, Tenisha-Tate Austin, were looking to renovate their home in early 2020 while completing a remodel with low interest rates. Their Marin Township home with a view of San Francisco Bay Reviewed in 2019. So they were shocked when the February 2020 assessment returned $455,000 less than last year, which totaled $995,000.
The black couple then decided to seek another opinion and, following the harassment, asked their white friend, Jan, to stand up and contact the appraiser as the homeowner. They exchanged family photos with her and removed any art that suggested the existence of a black family.
The appraiser listed their home at $1,482,500.
This prompted them to file a fair housing lawsuit against Janet Miller, an appraiser in federal district court, who lowered their estimate. The lawsuit names Miller, her firm, Miller & Perotti Real Estate Appraisers, and the national appraisal firm AMC Lincolns.
“We believe Ms. Miller undervalued our home because of our race and the current and historical racial demographics of where our home is located,” Austin said. “The sales comps the appraiser chose to use were inappropriate and guaranteed to lower the value of our home.”
A January filing on behalf of Miller and the defendants seeks to dismiss the claims against them, saying the Fair Housing Act does not apply to them because the home was not “sold or rented” by the owners.
The Austins are far from alone in their situation, with couples across the country reporting similar discrimination.
In the year A 2021 study from Freddie Mac, the publicly traded government-backed mortgage bond corporation, found that “12.5 percent of home purchases in predominantly black neighborhoods and 15.4 percent in predominantly Latino neighborhoods fetch below contract value (the amount a buyer is willing to pay for a property) primarily from appraisals in predominantly white neighborhoods.” It is only 7.4 percent.
The study coincided with previous observations that the more a neighborhood is filled with historically marginalized communities, the lower the average assessed property value.
“So a big issue, you know, when you’re going through the underwriting process, you know how a minority is viewed in terms of the appraised value of the home or even the ability to get a mortgage loan. .. a Caucasian male,” Young said.
“And in today’s society, basically, if you’re not a Caucasian male, if you’re a female, if you’re a same-sex couple, if you’re a minority, the numbers and the data show us that you’re outnumbered. Rejections are possible and your home equity is not as good as it should be based on clean financial and credit information.
At a White House press conference in Austin, housing bias was highlighted in reviews. There, the Biden administration announced action by the Asset Assessment and Valuation (PAVE) Task Force.
“Together, we have put together strong concrete actions and commitments to change the home appraisal process so that no homeowner has to exchange family photos or artwork just to get a fair value for her home,” said Susan Rice White. Domestic Policy Adviser, March 23 event.
“Studies show that eliminating the wealth gap created by homeownership can significantly reduce the racial wealth gap,” Rice said.
Similar to Home Lender Pal, the task force is developing a rule that sets quality control standards for automated appraisal models, focusing on technology to prevent algorithms from making biased decisions.
“The home appraisal workforce is one of the largest in our country. Less than 5% of home appraisers in America are people of color,” said Vice President Kamala Harris.
Some believe the problem is improving with more accountability and training on the real estate side. Mark Johnson, president of JPR Real Estate, said the National Association of Realtors has pushed education and awareness around fair housing.
“I think in our industry there’s something called implicit bias and implicit bias. The implicit biases, we all see, are the conscious decisions that people make that you and I don’t agree with, which are dangerous enough. But the most dangerous if you’re not aligned with the unconscious—obvious. Unconscious biases — and that’s what we’re working on with our team, is, ‘Hey, ask yourself, what kind of biases might you have that come out unconsciously in different ways?'” Johnson told Yahoo News.
He believes it all comes back to education and says his company would never do business with the vendor if he knew.
“The data shows that we are making a lot of progress in this area, and the four major lenders should be monitoring and reporting on the basis.”