MARCH 25, 2022 – Below is the American Enterprise Institute’s thoughts on the blatantly racist PAVE Report that came out this week. AEI says it better than I ever could. So, I have no comments to add. Well, I did send them thanks for spelling White with a W. Finally, someone with integrity to avoid race baiting.
Shalom,
The Mann
=================================
Comments on PAVE’s “Action Plan to Advance Property Appraisal and Valuation Equity: Closing the Racial Wealth Gap by Addressing Mis-valuations for Families and Communities of Color”
Reprinted below is a response from the AEI Housing Center to yesterday’s release of the PAVE report on appraiser bias:
On March 23rd, the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), composed of thirteen federal agencies and offices, released its report entitled “Action Plan to Advance Property Appraisal and Valuation Equity: Closing the Racial Wealth Gap by Addressing Mis-valuations for Families and Communities of Color.”
Commentary on PAVE’s conclusion:
PAVE concluded that “Homeownership is often hindered by inequities within current home lending and appraisal processes, which research shows disproportionately impact people in communities of color.”
As noted in the Executive Summary, the report largely rests on three studies for its conclusion: (i) a report by the Brookings Institution, (ii) a note by Freddie Mac, and (iii) a blog post by FHFA.[1] In our work, we have issued lengthy critiques that discredit the first two studies (see our rebuttal to Brookings and to Freddie Mac) and now take the opportunity to respond to the FHFA study.[2] Here is a summary of our findings:
The Brookings and Freddie Mac studies are not based on rigorous data analysis. Most importantly, they conflate race with socio-economic status (SES), i.e. income, buying power, marriage rates, credit scores, etc. Race-based gaps found in the Brookings and Freddie Mac studies either entirely or substantially disappear when adjusting for differences in SES. Furthermore, our analyses show that similar gaps are present in majority White or White-only tracts across different SES levels, raising serious questions regarding a race-based explanation.[3] We also addressed a rebuttal from the Brookings authors to our critique. We found that Perry and Rothwell’s (2021) rebuttal to our critique supported our claim of omitted variable bias, failed to rebuke our methodology, and never addressed our case studies. We also presented solutions based on our findings. The Freddie Mac study took pains to state that its research was both “exploratory” and “preliminary”. Yet PAVE accepted Freddie Mac’s findings at face-value, even though research by Fannie Mae provides a likely, non-race based explanation for the valuation discrepancy found by Freddie Mac. It is worth noting that Fannie Mae’s explanation castes a favorable light on the appraisal industry.
This conflation by both Brookings and Freddie Mac is of critical importance. While there is agreement regarding the symptoms observed by PAVE–racial and ethnic differences in homeownership rates, financial returns of owning a home, and median wealth–ascertaining the causes and workable solutions requires a competition of ideas.[4] PAVE excluded research that was inconvenient or inconsistent with the desired narrative and conclusion.[5]
The FHFA blog post, which we have not addressed until now, stated that in their “review of appraisals, we have observed references to race and ethnicity in the ‘Neighborhood Description’ and other free-form text fields in the appraisal form.” FHFA concluded that the use of such references is evidence of bias as the “racial and ethnic composition of the neighborhood should never be a factor that influences the value of a family’s home” and released 16 specific examples.
While we all can agree with FHFA’s statement that “racial and ethnic composition of the neighborhood should never be a factor that influences the value of a family’s home”, the blog post failed to provide any specifics as to the frequency of such occurrences. It only stated:
From millions of appraisals submitted annually, a keyword search resulted in thousands of potential race-related flags. Individual review finds many instances of keywords to be false positives, but the following are [16] examples of references when the appraiser has clearly included race or other protected class references in the appraisal.
Without more information, one is unable to discern whether this is evidence of a few bad apples or systemic behavior. This is made all the more problematic given that there is other evidence showing no systemic appraisal bias. Unfortunately, PAVE ignored that body of research, to wit:
AEI Housing Center (2021) found that racial bias by appraisers on refinance loans is uncommon and not systemic. To evaluate the existence of bias, the AEI Housing Center assembled a unique dataset with over 240,000 loans for which we knew the race of the borrowers.
Ambrose et al. (2021) concluded that “contrary to media allegations, our statistical analysis found that racial bias by appraisers on refinance loans is uncommon and not systemic.”[6]
Fannie Mae (2022) concluded that for refinance applications “Black borrowers refinancing their home on average received a slightly lower appraisal value relative to automated valuation models” and that “the frequency of ‘undervaluation’ did not have a notable racial pattern.”[7]Interestingly, Fannie Mae (2022) also rebuked the methodological approach in Freddie Mac’s research note that was cited by PAVE as one of the three main studies.[8]
Our conclusion is that PAVE has misdiagnosed the problem.[9] PAVE proposed 21 agency actions. It is highly questionable that these will address racial and ethnic differences in homeownership rate, financial returns of owning a home, or median wealth. In some cases, they may make these differences worse or take the pressure off in finding effective solutions. It also must be noted that HUD, and its predecessors have played a major role in perpetuating segregation and racial wealth disparities.[10] This alone should give pause to any objective reader of the PAVE report.
Rather than PAVE’s finding of “inequities within current home lending and appraisal processes, which research shows disproportionately impact people in communities of color” the real culprit are inequities in SES, which PAVE acknowledges when it states that “[m]uch of the gap in rates of homeownership can be traced to socio-economic factors that differ on average between Black and white homeowners.” While lower SES certainly reflects a legacy of past racism and lingering racial bias, which leaves Blacks at a large income and wealth disadvantage relative to most Whites, PAVE should have addressed this in its policy recommendations. Thus, the PAVE Action Plan, by misdiagnosing the causes of the racial gap, will likely lead to unintended consequences as the Action Plan does not address the root problem.
We agree with PAVE that we ought to support opportunities for income and wealth growth among lower-income households. However, we should address the root cause for lower SES, and not unsubstantiated claims of systemic bias and racism in the housing finance sector.
Based on an objective diagnosis of symptoms and causes using rigorous data analysis, we propose the following solutions:
The housing policy solutions are:
Building generational wealth through sustainable homeownership for low SES households by reducing leverage for aspiring low-income home buyers.
Increasing supply and reducing income stratification through Light Touch Density.
Promoting Walkable Oriented Development in existing neighborhoods with a mix of residential and commercial properties.
Other policy solutions, which might be explored, are:[11]
Encouraging two parents in households with children (single-parent households have been found to be a significant SES factor by a wide ranch of academic researchers).
Enacting occupational licensing reforms and allowing small businesses to be run out of one’s home (this has been found to be a significant barrier to low SES households).
More economical childcare by rolling back burdensome government regulations (childcare costs are a significant barrier to gainful employment by low SES households).
Real school choice for access to quality elementary and secondary education (racial and ethnic minorities would benefit greatly from real school choice).
Improving access to technical and apprenticeship training (this would open up access by low SES households to these well-paying jobs).
Encouraging state and local governments to address public investment disparities relating to minority and lower income neighborhoods.
Recognizing the importance of SES factors is key to fashioning appropriate public and private responses. A misdiagnosis that focuses on other factors will not address the root problem and could potentially lead to unintended consequences. We must be mindful that many public policies aimed at addressing racial discrimination have had unintended consequences that have done substantial harm to low-income households generally, and minority households in particular.
Footnotes:
[1] Interagency Task Force on Property Appraisal and Valuation Equity (PAVE), Action Plan to Advance Property Appraisal and Valuation Equity: Closing the Racial Wealth Gap by Addressing Mis-valuations for Families and Communities of Color, March 24, 2022, pp. 2-3.
[2] Despite the AEI Housing Center having undertaken a significant body of research on the topic of racial bias in housing finance over a course of years and notwithstanding efforts to engage with PAVE and some of its members, we were unable to engage with PAVE and our work was not mentioned in the report. Yet, PAVE stated that “Over the past 180 days, the Task Force has undertaken a collaborative and comprehensive approach toward identifying actions to address appraisal bias. This approach involved extensive consultation with subject matter experts and leaders across industry, academia, trade and civil rights groups, and government.”
[3] The same critique to the Brookings paper also applies to research by Howell and Korver-Glenn (2021) and a recent Redfin post on the same topic.
[4] The University of Wisconsin Board of Regents stated this concept best over 125 years ago: “Whatever may be the limitations which trammel inquiry elsewhere, we believe that the great state University of Wisconsin should ever encourage that continual and fearless sifting and winnowing by which alone the truth can be found.” https://news.wisc.edu/sifting-and-winnowing-turns-125/
[5] This goes back to when President Biden in his January 26, 2021 “Memorandum on Redressing Our Nation’s and the Federal Government’s History of Discriminatory Housing Practices and Policies” for the Secretary of HUD cited as fact “a persistent undervaluation of properties owned by families of color.” Thus, PAVE would need to conform to the President’s stated narrative, notwithstanding strong evidence to the contrary. https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/26/memorandum-on-redressing-our-nations-and-the-federal-governments-history-of-discriminatory-housing-practices-and-policies/
[6] Ambrose, Brent W., James Conklin, N. Edward Coulson, Moussa Diop, and Luis A. Lopez. “Does Appraiser and Borrower Race Affect Valuation?” Available at SSRN 3951587 (2021).
[7] Williamson, Jake and Mark Palim. “Appraising the Appraisal: A closer look at divergent appraisal values for Black and white borrowers refinancing their home.” (2022).
[8] In particular, Fannie Mae wrote that “We chose to study refinance applications, as opposed to home purchase applications, because the appraiser in a refinance transaction typically interacts directly with the homeowner (i.e., the borrower), establishing a pathway for potential bias to influence the appraisal results. The race or ethnicity of the borrower is often disclosed in the loan data, making it possible to directly observe any correlation with value. On the other hand, in a purchase transaction, the appraiser typically does not interact with the buyer (i.e., the borrower) of the property but rather with the seller or the seller’s agent. The availability of racial or ethnic data of sellers and real estate agents is limited, thereby making an analysis of valuation differences by different demographics for purchase transactions limited or incomplete relative to the analysis detailed below using refinance transactions.” (p.3)
[9] At times, PAVE tried to have it both ways. On the topic of undervaluation, which is the main focus in the Freddie Mac analysis because of the negative impact on minority home buyers, the PAVE report stated that a lower appraisal can be beneficial to the buyer but hurtful to the seller as “it limits the seller’s realized home equity gains and therefore impacts the seller’s wealth.” (p.15)
[10] As noted by PAVE throughout the 20th century, the “federal…government systematically implemented discriminatory policies that led to housing segregation.” Not mentioned by PAVE was the U.S. Commerce Department’s role in implementing a zoning regime designed to keep Black and ethnic-minorities out of single-family detached neighborhoods (see Chapter 1, AEI Light Touch Density E-Book), the 1949 Housing Act which resulted in the high-rise public housing and urban renewal programs, both of which worked to the great detriment of Black households and neighborhoods, the 1967 Presidential Task Force on Housing and Urban Development (headed by HUD Secretary Weaver), which proposed a 10-year housing program to eliminate all substandard housing in the U.S. (source: Lyndon Johnson Library), that was enacted in the 1968 Housing and Urban Development Act, the consequences of which led to HUD and FHA destroying many American cities, especially Black neighborhoods (Cities Destroyed for Cash: The FHA Scandal at HUD), the Tax Reform Act of 1986, which created the Low Income Housing Tax Credit, which has perpetuated racial segregation (Chicago tax credit program mostly produces affordable housing in poor black areas, March 15, 2021), the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which granted HUD the authority to set affordable housing mandates for Fannie Mae and Freddie Mac, and HUD’s 1995 National Homeownership Strategy: Partners in the American Dream, which led to over 10 million foreclosures and did much to create the wealth disparities Blacks now face. All of these failures may be traced to HUD, or its predecessor agencies responsible for federal housing policy.
[11] Many thanks to our AEI colleagues Naomi Schaefer Riley and Angela Rachidi for many of these ideas. Please see their thoughtful analysis: https://reason.com/2021/02/24/fix-family-poverty-with-free-markets-for-once/
All posts by admin
FANNIE MAE STUDY CONCLUDES NO RACIAL BIAS IN APPRAISALS
MARCH 12, 2002 – Now, two studies of millions of appraisals by the American Enterprise Institute (AEI) and Fannie Mae have concluded that there is no racial bias in real estate appraisals.
For those involved in the industry, this comes as no surprise. It is essentially impossible for real estate appraisers to be biased. Probably 95% of the time the appraiser knows nothing about the physical characteristics of the borrower. Nearly 100% of the time the appraisal reviewers know nothing about the borrower. And ALL appraisals must be approved by a reviewer.
Also, the market sets prices and all appraisers do is analyze recent comparable sales and arrive at a value for the subject. Which, in purchase situations, is equal to or higher than the sales price 95%+ of the time.
Racist organizations like the Brookings Institution and others that are falsely complaining about appraisal bias need to ‘follow the science’ as they like to say. Scientific studies 100% conclusively say there is no appraisal bias.
Maxine Waters and President Biden owe the appraisal industry an apology. And so does the Appraisal Institute for not supporting its own members.
The real estate appraisal industry is the gold standard for an unbiased profession. We have been the independent referee for 80+ years.
Lastly, we all know about the Fair Housing Act, redlining, discrimination being illegal, et al. To say we need to be educated about such is ridiculous. If you have lived in America since the 1970’s, you know all about fair housing laws and what is and is not discrimination.
The true racists are those that accuse everyone else of being racist. These people need to be exposed and told where to stick their unfounded claims. They should be sued for slander and defamation, also.
Hey, Appraisal institute, get a backbone and stand up for your members! There is no legislation that can change 4,000+ years of economic theory. The appraisal industry does not need to make any changes. It is already fully diverse and inclusive of people of all socio-economic classes (I grew up in mobile homes and am Jewish….I have the low-priced housing and minority characteristics covered!). Remember, skin-color and the only two genders have nothing to do with diversity and inclusivity.
Shalom,
The Mann
BUY TO THE SOUND OF CANNONS AND SELL TO THE SOUND OF TRUMPETS
MARCH 5, 2022 – A friend shared the above quote by Baron Nathan Rothschild. Nowadays we say buy the rumor and sell the news.
Just as the time to buy oil and gas and all commodities was 2 years ago during the worldwide lockdown. Soon will be the time to buy Russian assets.
I recall people saying I was crazy to buy when oil traded at -$30 a barrel (no one gives credit to President Trump ordering the USA to stock up its oil reserves when the price of oil was so cheap…brilliant move). Exxon traded at $31 (over $84 yesterday). Freeport-McMoran I had bought around $6. Yesterday it broke $50. With virtually every commodity at record highs, I will start to slowly take my cards off the table. You sell when everyone in the world is wanting to buy. As is the case now and for awhile longer.
The challenge will be figuring out when to buy Russian assets. And which ones. Russia isn’t going away. Their oil and gas will be needed by Europe, and others, for the remainder of this century. 25% of the world’s wheat goes thru Russia/Ukraine (that is why the price was up 40% this week!). Even if Russia/Ukraine is limited to trading with China, Iran, Venezuela, Cuba, and other members of that alliance, their companies will come back and do well. China alone has enough people to buy Russian goods forever. Remember, Russia’s economy is only the size of Italy’s. It doesn’t take much buying to support that economy.
The key is figuring out which companies and ETF funds will survive. I remember in early 2009 when Fifth Third Bank traded at $1.01 and I believe Bank of America was below $5. The fear was these banks would not survive. But, if you knew they would survive, you had minimal downside risk. As we say, at those prices it is like buying an option. You are prepared to lose 100%. But, also prepared to hit a 5x or 10x winner.
We are in a similar period for Russian stocks and other stocks invested in Russia. I don’t have definitive answers, yet. But, I think I am getting a handle on what to watch for re the Smart Money. The Smart Money will be investing heavily long before the public, and Fake News Media, know things have turned the corner.
I have long thought about writing a paper about markets that have declined 75%-90%+ and bounced all the way back. Those opportunities occur enough for you to make large killings throughout your life. The key factor is KNOWING that market will survive. The DJIA was going to survive The Great Depression. It declined 89%, but it was going to stay around and rebound. The NASDAQ did about the same in the Dot Com Bubble. There are dozens of such events. There are lots more where the stock went 100% under and did not survive. Again, the key is KNOWING the asset will survive no matter what.
If you are crazy enough to want to invest in depressed Russian assets, stay in touch with me. I am not 100% certain I will dive in. But, I do know this is a rare opportunity to keep an eye on. Rare because many of these assets are down 99% right now.
And, yes, you can tell I am totally against companies boycotting Russia. I have always said corporations owe society nothing. If you want something to help society, that is what Not-For-Profits are for! Corporations need to stay out of politics. In fact, they should be banned from donating to political campaigns. Just make money for the owners, pay your employees, buy supplies from other companies, et al. All of that done ethically and within existing laws, of course.
Albeit, I would say the Russian people are lucky right now to have no Facebook and Instagram and so on!!! That is a dream world! Can you imagine if your kids had no social media to waste their lives on!!!! Your kids had to spend that time with you:) I have a dream….
These are times I live for. I look forward to seeing how this evolves. And possibly, making money off of it:) We shall see.
Shalom,
The Mann
$120 OIL – WHAT A BEAUTIFUL SIGHT :)
MARCH 5, 2022 – Just two years ago oil futures traded negative for a day and the tree huggers said oil was dead. Of course, I disagreed and predicted we would see $200-$300+ oil in this next cycle.
The first super cycle lasted about 120 years and saw a peak around $150 and then a drop back to where it all began in the early 1900’s.
A new super cycle began in 2020. This should take us to all-time highs and also end the history of oil. At the end, oil will likely trade for $1 as no one will be using it. ((see the history of aluminum prices in the 1800s – In the mid-1800s, the first aluminum ingots on the market went for $550 per pound. Fifty years later, not even adjusting for inflation, it cost 25 cents.))
I am not saying we will see $200+ in this current up move. It will more likely occur a decade or more into the future. This next cycle should last the remainder of this century.
Someone, please let AOC know what the price of crude is today:)
For those of us that own Exxon Mobil and other Big Oil and mineral companies, life is soooo sweet. Thanks to the climate change Fake News people for driving prices sky high. Sadly, they just hurt the poor with their stupid green agenda.
An ending fact….The Keystone XL pipeline will send the USA over 800,000 barrels of oil a day. We buy 595,000 barrels of oil a day from Russia. Thanks to the USA and Europe for funding Russia’s war in Ukraine! As an aside, I reviewed an appraisal of the Keystone XL pipeline and not a single landowner (!!!) complained about the pipeline going through their property. Only the climate change Fake News people complain.
Viva La Crude!
Shalom,
The Mann
APPRAISAL REVIEW QUESTION
FEBRUARY 22, 2022 – I received the following question:
Q: If I as a bank appraiser chose to do an in-house appraisal, will it need to be reviewed? If so, what is the benefit and why not just use one of my vendors?
As appraisals are rarely done in-house, I have never thought about this situation. I contacted the Regulators and received the following answer.
A: When the residential threshold was increased it also amended the agencies’ appraisal regulations to require regulated institutions to subject appraisals for federally related transactions to appropriate review for
compliance with USPAP. This became effective January 1, 2020 and is now part of the regulation. As such, a bank can be cited for a violation of law if the review is not completed.
We do not dictate who performs the review only that the reviewer is competent and independent of the transaction; the reviewer can be from the same appraisal department as the individual who performed the appraisal. The bank may perform the review internally or out-source the review.
Now we all know. As always, feel free to ask me any question regarding FIRREA. If I don’t know the answer, I will find it out.
Stay well and safe out there,
The Mann
GAS VERSUS ELECTRIC VEHICLES
FEBRUARY 7, 2022 – This is an excellent article comparing the two types of vehicles.
Do Electric Cars Pencil Out? – EPautos – Libertarian Car Talk (ericpetersautos.com)
Of course, there is a lot more damage to the planet from using huge amounts of electricity as hundreds of major power plants will be needed to address the increased demand. And most of the plants will have to depend on oil and gas. Keep buying gas only vehicles if you want to help the planet.
Shalom,
The Mann
SAVE OUR PLANTS, INCREASE YOUR CARBON FOOTPRINT
FEBRUARY 1, 2021 – I have spent my entire life increasing my carbon footprint. When a friend mentions something like buying an electric vehicle, I get in my 1996 Ford 250 gas hogging truck and just drive around for a few hours to burn as much gas as I can. For whatever reason, I have always been anti-environment…maybe because the tree huggers have just been so annoying about the issue. I have long joked that there is lots of room on Mars for humans when we need to go there:)
It is good to finally see some studies come out to support an increase in C02 emissions. Afterall, plants live on CO2. Carbon neutral would be the death knell for this planet. Thankfully, humans will continue to increase their CO2 emissions and save this planet – just as they have for the past 200 years.
Studies project the number of automobiles will increase from 1.2 billion today to 2.5 billion (!) by 2050. 98% use gas and diesel today and it is expected over 90% still will in 2050! Wow, that is going to be an amazing increase in C02 from vehicles alone. Add to that increasing online purchases and delivery vehicles will increase exponentially – even more CO2. I can hear the plants saying yum yum:)
I saw this in a recent Grant’s Observer:
Bloomberg Opinion’s Lionel Laurent shines a light today on the environmental cost that has accompanied the bitcoin boom: As the digital ducats require increasing computational firepower to process transactions, bitcoin’s current estimated annual carbon footprint of 367 million tons is equivalent to the emissions of New Zealand, while a single bitcoin transaction generates CO2 equivalent to more than 700,000 swipes of a Visa debit card, according to Digiconomist. Similarly, the crypto’s annual energy consumption stands at about 78 terawatt-hours, up from less than 10 terawatt hours in 2017. Then, too, bitcoin hunters have utilized global regulatory arbitrage to improve their economics.
That alone should encourage everyone to invest in Bitcoin! Just think how many jobs are created worldwide to produce this amount of power. And the profits being made by power plant builders and power companies. Definitely a win-win for people and plants. I suppose the 300-500 coal plants under construction and proposed worldwide just sends an environmentalist in to disbelief that his/her plan to kill off plants and humans has zero chance of succeeding. Nothing like wasting time fighting a fruitless battle:)
I do find it funny that the young generations that are so in to a green economy are the ones that are greatly increasing CO2 emissions thru online retailing and cryptocurrencies. As they would say, I am SMH.
I encourage everyone to read and pass along Dr. Moore’s, co-founder of Greenpeace (!), study on C02 and more throughout the history of our planet.
It is neat to imagine a time when humans were thriving when CO2 was over 10x higher than it is today. As Dr. Moore points out, if we hadn’t started the Industrial Revolution and invented the automobile, it is likely plants and humans would be extinct in the not too distant future. If the ‘we were wrong about global warming so let’s call it climate change’ people had their way, they would eliminate the lifeblood of plants and lead to the end of the human race. The evildoers can be stopped by you simply doing your part to increase your carbon footprint. Please do your part!
Another neat thing to imagine is when humans were thriving in temperatures that were more than 20 degrees Celsius warmer than today. I suppose we were living all over the planet as there weren’t glaciers and such that were too cold for us to survive in. To think the scare mongers are worried about a one or two degree increase this century. From a historical perspective, it will still be very cold. Brrrrr.
Save a Plant, Increase Your Carbon Footprint!
Shalom,
The Mann
DATE OF VALUE DIFFERS FOR APPRAISALS AND EVALUATIONS
JANUARY 8, 2021 – It only took the Interagency Appraisal and Evaluation Guidelines (IAEG) document being out for a full 10 years for me to be made aware of the difference in Date of Value for Appraisals versus Evaluations. As they say, you learn something every day!
For Appraisals, the IAEG states:
The estimate of market value should consider the real property’s actual physical condition, use, and zoning as of the effective date of the appraiser’s opinion of value. (emphasis added)
In my 35 years of doing appraisals and appraisal reviews, the ‘Date of Value’ has always been the last date the appraiser(s) inspected the subject. Usually, there is only one inspection and that is the Date of Value. Of course, this is for Market Value and Market Value ‘As Is.’ We are not talking about prospective values.
For Evaluations, the IAEG states:
Provide an estimate of the property’s market value in its actual physical condition, use and zoning designation as of the effective date of the evaluation (that is, the date that the analysis was completed), with any limiting conditions. (emphasis added)
‘The date that the analysis was completed’ is what us valuers call the Date of Report. The Date of Report can be the same as the Date of Value, but that rarely occurs. For appraisals, nearly 100% of the time the Date of Report comes after the Date of Value.
In conclusion, the IAEG wording indicates that the Date of Value for an Appraisal is what it has always been. However, the Date of Value for an Evaluation is the Date of Report.
For Evaluations, I have always assumed the Date of Report was also my Date of Value. I am not sure why. I just felt that my analysis did indeed go thru the day I was finishing the Evaluation. So, that was my Date of Value. Blind luck I guess.
As an aside, it has been suggested that Evaluators add an Extraordinary Assumption to their Evaluation Report that assumes no material changes have occurred between the date the subject was inspected and the Date of Report. Probably not a bad idea. I won’t digress into my rant that I don’t like including Appraisal/USPAP items (e.g. Certification, Hypothetical Conditions, Extraordinary Assumptions, et al) in Evaluations. It’s your Evaluation, do what you want to CYA.
Lastly, I have checked with the Regulators and sure enough this is a difference that was overlooked. Hopefully, in the next revision this will be addressed.
Happy New Year!
The Mann
STUDY CONCLUDES THAT APPRAISERS ARE NOT BIASED
JANUARY 8, 2021 – The American Enterprise Institute has published a study about the possibility that appraisers have intentional or even unintentional racial bias. Their conclusion is:
We conclude allegation that knowing the race of the applicant results in racial bias by appraisers on refinance loans is uncommon and not systemic. This same analysis supports the conclusion that unintentional bias based on race is also uncommon and not systemic.
You can find the article and link to the report at:
It would be nice if the racially biased Brookings Institute would issue an apology to the appraisal industry. But, racists have an agenda and do not apologize. Thankfully, there is access to actual data and entities like the AEI can analyze and report the facts.
Basically, it is simply impossible for the appraisal industry to be racial or gender biased. Probably 99%+ of the time appraisers know nothing about the physical characteristics about the borrower in residential transactions. Also, every appraisal report is reviewed and I would say near 100% of the time the reviewers know nothing about the borrower at all.
AVMs are often used in the residential arena and they know nothing about the borrower nor the subject’s neighborhood, et al. To them, data is data. Finding the best comparables is based on analyzing numbers. That simple. And for the most part, it is the same for human appraisers.
There is one group of people in real estate that can have significant bias. I won’t name them. You can probably figure it out. There might actually be a few groups involved in this arena that can have bias. That is not to say it is widespread and rampant.
For those who want to keep the ‘conversation’ going, provide the AEI report. You will see how fast the other side wants to stop the conversation and change the subject:)
Great work AEI. I hope they will now do a study about the 20 million whites that live in poverty and see what it is about their neighborhoods that is common and how action can be taken to improve their standard of living….and housing. At the same time, I am sure those solutions can help everyone that lives in poverty. Remember, poverty is colorblind.
The Mann
GEORGIA CLARIFIES LAW ON EVALUATIONS
SEPTEMBER 26, 2020 – The following is from the Appraisal Institute’s Washington Report: