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Race-based appraisals threaten American Dream for Black and Brown home sellers

It’s a practice nothing short of robbery — and banks, lawmakers and appraisal companies must end it.

A September 2021 report found the race-based home appraisal discrepancies affected not only individual sellers, but whole areas in which Black or Latino people were the majority.
AP file photo

It’s been long accepted that the process of home-buying has always been more art than science, with a host of factors — including a buyer’s negotiation skills and a seller’s motivation — determining a dwelling’s final sale price.

One factor that should never be taken into account: The race of the seller.

But that’s exactly what’s happening as we hear story after story of Black home-sellers who are low-balled by bank appraisers, only to get substantially higher appraisals for the same house when white friends, colleagues and real estate testers pose in their stead for a re-appraisal.

A Black couple in Marin County, California saw their home’s appraised value jump by almost $500,000 last year when they removed personal photos and Afrocentric art from their home and had a white couple stand in for them for a second appraisal.

The couple is now suing the appraisal company for discrimination under federal fair housing laws.

“We shouldn’t have to go through this. We shouldn’t have to have our white friend standing in,” said Paul Austin, who owns the home with his wife Tenisha Tate-Austin.

He’s right. And it’s a practice — a custom, really — that must end.

Nothing short of robbery

A September 2021 report by federal mortgage lender Freddie Mac found the race-based discrepancy affected not only individual sellers, but whole areas in which Black or Latino people were the majority.

The report found only 7.4% of appraisals in census tracts that are majority-white came in below a property’s contract price, compared to 12.5% for majority-Black areas and 15.4% for the Latino tracts. The study also found homes in these areas were already more than twice as likely to be undervalued than those in white areas.

Chicago is no different, as a 2020 Sun-Times story found.

It’s a situation nothing short of robbery. Not only does it shortchange Black and Latino home-sellers, it also makes it hard for them to get a fair shake should they need an appraisal in order to pull equity of a home to, say, do repairs or send a kid to college.

Openly race-based lending practices are no longer legal, due to federal fair housing laws of the 1960s and 1970s.

Somehow, the reforms skipped the appraisal process. The bank that can no longer deny a homeowner a loan because of race can unwittingly send an appraiser who undervalues a house if the seller is Black or Latino — as long as race isn’t listed as a factor in the evaluation, of course.

Banks, federal and state lawmakers, and the appraisal community must feel pressure to fix the problem — now.

Send letters to letters@suntimes.com.