(incoming IHIV hand waving. Nothing to see here)
Hard to fathom this difference and how it could be justified, when they all should be using the same comp and other data?
My first inclination is it could have been a cold market swinging into a hot one... but nope. Hot market at all points.
And the disparity from $110,000 - $259,000 is just too huge to ignore.
This is how generational wealth is denied to some systemically. How many just accept this, and not fight and thus never realize any equity.
Black homeowner had a white friend stand in for third appraisal. Her home value doubled.
Carlette Duffy felt both vindicated and excited. Both relieved and angry.
For months,
she suspected she had been low-balled on two home appraisals because she's Black. She decided to put that suspicion to the test and
asked a white family friend to stand in for her during an appraisal.
Her home's value
suddenly shot up. A lot.
During the early months of the coronavirus pandemic last year, the first two appraisers who visited her home in the historic Flanner House Homes neighborhood, just west of downtown,
valued it at $125,000 and $110,000, respectively.
But that third appraisal went differently.
To get that one, Duffy, who is African American,
communicated with the appraiser strictly via email, stripped her home of all signs of her racial and cultural identity and had the white husband of a friend stand in for her during the appraiser's visit.
The home's
new value: $259,000.
"I had to go through all of that just to say that I was right and that this is what's happening," she said. "This is real."
Now she wants justice. Along with the Fair Housing Center of Central Indiana, Duffy has
filed fair housing complaints against the mortgage lenders and appraisers she accuses of undervaluing her home because of her race.
Housing experts and historians say residential real estate has been historically marred by discrimination. Across the nation, homes owned by Black Americans are significantly undervalued next to homes in comparable white neighborhoods, according to a study by Brookings.
...
The complaints
Duffy and the Fair Housing Center of Central Indiana filed the complaints with the U.S. Department of Housing and Urban Development. She's asking for the federal agency to investigate the appraisals.
Respondents in the complaints include Indianapolis-based appraiser Tim Boston, appraiser Jeffrey Pierce, CityWide Home Loans and employee Craig Hodges, lender Freedom Mortgage and two of the company's employees.
The complaints alleges they violated fair housing laws by allowing race and color to impact their appraisals of her home and their lending practices. The appraisers, the complaints said, purposely pulled comps that were unfair and racially motivated.
Appraiser Tim Boston denied the allegations.
"My appraisal reports are data-driven. I could care less about culture or sexual orientation," he said. "It's all about bricks and sticks and dirt."
The remaining respondents could not be reached by IndyStar.
...
Despite the public safety orders and businesses closures caused by the pandemic,
the real estate market in Central Indiana was red hot. The Federal Reserve was keeping interest rates low. ...
So Duffy began the process of refinancing her home mortgage, which
she purchased for $100,000 in 2017.
But, the process didn't go as she expected, according to the HUD complaint. Duffy worked with CityWide and Jeffrey Pierce of Pierce Appraisal in March and April 2020. They
valued her home at $125,000.
...
She was assigned Indianapolis-based appraiser Tim Boston of the Appraisal Network, according to the complaint.
Boston and Freedom Mortgage appraised her home at $110,000 — just $10,000 more than its purchase price and $15,000 lower than the first appraisal.
The second appraised value, assigned less than two months after the first appraisal, confused her. "How did I lose $15,000 in my home value?" she asked.
...
"My appraisals are always supported by data because my license is at risk if I don't do it correctly," he said. "From the appraisal management company to the bank, those appraisals go through statistical packages, a logarithm type software to test my value. If it's not within a certain range of those software programs, it'll kick back."
...
Something else is happening...
It wasn't just the appraisals that sounded the alarm for Duffy. During the process, Duffy said she had also been quoted interest rates of
4%, 3.75% and 5%.
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By comparison, Duffy said the
interest rate on her current mortgage loan was 3.9%
At the time, rates on the 30-year and 15-year mortgage had fallen below 3.5% that April and continued declining throughout the spring and summer, according to Freddie Mac data.
Duffy said she had worked to improve her credit from the time she purchased her home so she could go from a Federal Housing Administration-insured loan to a conventional loan. She said pulling her credit scores numerous times had an adverse effect on her credit score.
"When I finally did try again towards the end of the year, I couldn't do a conventional. I could only do an FHA," she said.
"Even with that, when I didn't declare race and gender in the application process, I got an APR of 2.9%."
...
Duffy started the refinancing process for a third time in October and November, reaching out to unidentified company. That time, the complaint notes, s
he did not declare her race or gender as part of the application process as she did with previous lenders.
When an appraiser was assigned, Duffy said she kept the interaction to email with no phone interaction. And unlike the first two times, she took down the photos of herself and her family, and removed her African American art and books that might identify her race.
"
I staged my home to look as ethnically neutral as possible," she said. "I was just numb to it, and I think it was more so numb just because of the fact that it was me just going through the process like I'm not crazy. I'm not crazy. I'm not crazy."
t
Minus the missing artwork and identifying items, before-and-after photos shared with IndyStar show a home with identical living rooms and kitchens.
Duffy said she would be out of town and that her brother —who was really
a friend's white husband posing as her relative — would meet with the new appraiser. On the day of the appraiser's visit, Nov. 4, Duffy gave her friend the Wifi password so he could get work done and left the home.
He texted her when it was time for her to return, noting that nothing about the visit was extraordinary. Two days later,
Duffy received a copy of her new appraisal with the higher $259,000 value.
...
"I'm excited, vindicated, relieved, angry,
extremely peeved since I can't say the other expletives that were running through me at that point in time — destroyed that I had to go through all of that," she said. "This is real ... just being able to prove it is the hard part."
Ramifications
Nelson of the Fair Housing Center said Duffy's experience represents a decades-long problem.
"
The market was already appreciating at the time she was getting the first two appraisals done. Why weren't those appraisals showing that? They didn't."
She said Duffy's story raises questions about how the appraisal industry works.
The industry is part of the reason why Flanner House Homes neighborhoods had to be built as a "sweat equity project" and the industry supported the redlining process, Nelson said.
"I think there is a lot of science there, but the appraisal industry has been able to give this perception of it being an art and science that then results in them to be able to run almost unchecked or unable to be verified as to whether or not they're following recommended guidelines," she said.
Andre Perry, of Brookings, has conducted research on how racial bias distorts the housing market. He compared home prices in neighborhoods where the share of the Black population is greater than 50% to homes in areas where the share of the Black population is less than 50%.
They controlled for crime, walkability and other factors that could affect home prices.
After those factors were controlled for, homes in Black neighborhoods were underpriced by 23% or about $48,000 per home. Cumulatively, there was a loss of $160 billion in lost equity.
Perry's research preceded the crafting of
the Real Estate Valuation Fairness and Improvement Act of 2021, which was introduced in the U.S. House of Representatives in April. The bill addresses racial disparities in residential and commercial real estate appraisals.
Discrimination in appraisals can be both systemic and individualistic.
"Systemic is the price comparison model," he said. "When you only compare homes to like peers in neighborhoods that have been discriminated against, you essentially just recycled discrimination over and over again ... You have individual acts of racism and you have more systemic reasons why.
Both are robbing people of individual and community wealth."