Opinions of Value

Your source for appraisal news and trends

Menu
  • Home
  • AI Resources
  • Education
  • Publications
  • Professional Practice
  • News
  • Advocacy
  • About Us
You are here: Home / appraisal bias / Appraisal Institute Reinforces Commitment to Expand Diversity, Tackle Housing Challenges

Appraisal Institute Reinforces Commitment to Expand Diversity, Tackle Housing Challenges

October 21, 2020 by Appraisal Institute Staff

With the critical issue of racial justice being examined throughout the country, the Appraisal Institute is striving to expand opportunities for aspiring minority appraisers, combat unconscious bias in valuation and find solutions to promote the flow of credit in economically disadvantaged neighborhoods.

The Appraisal Institute has several programs concentrating on the issue of diversity, including the Appraiser Diversity Pipeline Initiative with Fannie Mae and the National Urban League, along with the Minorities and Women Course Scholarship Program from the Appraisal Institute Education and Relief Foundation. Further, the organization’s member-comprised Diversity Panel is discussing new steps that the Appraisal Institute can take toward an even stronger commitment to diversity and inclusion.

Additionally, in 2019 the Appraisal Institute formed its Women’s Initiative Committee, whose discussions have centered on scholarship and mentorship opportunities in the profession. Also, recent conversations with leadership at The Appraisal Foundation have presented an opportunity for the Appraisal Institute to partner with TAF in efforts to involve more historically Black colleges and universities in the undergraduate and graduate review program that the Appraiser Qualifications Board has established.

Regarding alleged bias in valuation, “ultimately, appraisal practitioners apply value theory to real estate, and these theories are universal in economics,” said Appraisal Institute President Jefferson L. Sherman, MAI, AI-GRS. “At the most basic level, the three approaches to value – sales comparison, cost, and income capitalization – are taught and practiced around the globe. Professional appraisers have a huge stake in ensuring bias does not enter the appraisal process, because at the end of the day, we sell credibility. Frankly, bias is our adversary regardless of what form it takes.”

Sherman further noted that, “credible, reliable opinions of value are fundamental to economic security for lenders, buyers, sellers and property owners, together with other stakeholders in property tax, income tax and eminent domain. Our work must remain impartial, objective and independent, regardless of the parties involved.”

While individuals from all walks of life can carry unconscious biases, professional appraisers are bound to standards and codes of ethics that strictly prohibit bias and discrimination, requiring independence and objectivity. The Appraisal Institute believes the best way to confront any unconscious bias that may exist at the individual level is through education, and where necessary, through enforcement. A qualified appraiser knows how to conduct a thorough market analysis and make appropriate adjustments. Consumers should ask the lender for the qualifications of the appraiser and specifically, whether they are designated by a professional appraisal organization such as the Appraisal Institute.

In its Aug. 20 letter to The Appraisal Foundation, the Appraisal Institute cited its belief that existing requirements can be reinforced and enhanced starting with the AQB “Real Property Appraiser Qualification Criteria.” The letter said that while the current “Criteria” clearly allows educational programming on bias and discrimination under allowances for “Ethics,” the Appraisal Institute believes the creditable topics list could be expanded with additional examples directly relating to bias and discrimination. This enhancement would stimulate additional education ideas amongst appraisal education developers and providers on this important topic.

The Appraisal Institute also is exploring additional actions to reaffirm existing requirements including further research, guidance and education on matters relating to real estate market trends, unconscious bias and independence.

While several recent studies have been published on matters relating to alleged bias in real estate, these studies appear to have methodological flaws, including reliance on U.S. Census, property tax, and sales price information as proxies for professional appraisals. Some in the real estate industry claim that appraisers are at fault for producing opinions of value that fail to match a home’s listing or contract price. In fact, appraisers undertake thorough research and thoughtful analysis to develop reliable, credible opinions of value. Appraisals completed for mortgage transactions are used to assist lenders in making lending decisions. Buyers and sellers often have emotional value attached to a home or are unaware of the market. They should not assume an appraisal is somehow “wrong” if it does not match the listing or contract price. There is no reason to assume the contract price is the “correct” price simply because it is higher (or lower) than the appraisal.

Ultimately, many of the issues under public discussion stretch beyond the realm of valuation or appraisal, into mortgage finance and economic development. We support efforts to revitalize disadvantaged neighborhoods, but these require policy and/or legislative decisions. Appraisers are not the cause of, or responsible for, value disparities in neighborhoods – that is a function of the free market and we only reflect the market; we do not make the market.

Appraisers can help by advocating for establishment of more thoughtful and creative programs that provide secondary sources of financing (secured or unsecured) to bridge the gap between the total cost of the proposed renovation or construction and the market value of the property. Loan application frustrations may be mitigated by involving appraisers earlier in the transaction or at the time of application for a construction or renovation loan. Establishing an “as completed” or “subject to” market value can help “right size” a project for the particular market area, helping to avoid over-improvements. Further, where gaps exist between the total cost of the project and the subject property’s market value, we suggest policy makers explore creative solutions such as secondary sources of financing that leverage the work of community development programs. Such efforts have found success in cities like Detroit, and such initiatives could be enhanced by federal agency involvement or support.  

“We look forward to working with policy makers, consumers, civil rights organizations and other stakeholders on all policy matters that involve real estate valuation and in pursuit of the increased flow of capital to disadvantaged communities or inactive markets,” Sherman said.

Filed Under: appraisal bias, appraiser diversity

Trackbacks

  1. AI Joins Forces with Other Organizations to Combat Unconscious Valuation Bias says:
    October 30, 2020 at 11:26 am

    […] I’m also pleased to let you know that we published a lengthy post on AI’s blog last week hitting these issues head-on. It’s worth noting that members of the media around the country are among our social media followers. You can read the blog post via the following link: http://blog.appraisalinstitute.org/appraisal-institute-reinforces-commitment-to-expand-diversity-tac… […]

Latest Posts

  • AI Collaborates with Other Organizations to Award Scholarships February 26, 2021
  • 2021 Appraisal Institute President Rodman Schley’s Vision for the Year February 11, 2021
  • Save the Date for the 2021 Appraisal Institute Annual Conference February 5, 2021
  • AI Mourns Passing of 2016 President Scott Robinson January 29, 2021
  • Media Coverage of Appraisal Institute Seen by More than 700 Million January 26, 2021
  • AI Co-signs Letter to President-Elect Biden on Commercial Real Estate Issues December 23, 2020
  • AI’s Major Accomplishments Throughout 2020 November 27, 2020
  • AI Joins Forces with Other Organizations to Combat Unconscious Valuation Bias October 30, 2020
  • Appraisal Institute Reinforces Commitment to Expand Diversity, Tackle Housing Challenges October 21, 2020
  • 17 Professionals Honored with Appraisal Institute Awards September 25, 2020

Posts by topic

  • 2014 Presidents message (5)
  • 2015 President's Messages (12)
  • 2016 President's Messages (8)
  • 2017 President's Messages (13)
  • 2018 Annual Conference (5)
  • 2018 Appraisal Institute President's Messages (3)
  • 2018 President's Messages (9)
  • 2019 Annual Conference (8)
  • 2019 President's Messages (12)
  • 2020 Appraisal Institute President's Messages (8)
  • 2020 President's Messages (5)
  • 2021 President's Message (2)
  • AI Connect (5)
  • AMS (2)
  • appraisal bias (1)
  • appraisal careers (17)
  • Appraisal Insstitute designatons (2)
  • Appraisal Institute (219)
  • Appraisal Institute Annual Meeting (8)
  • Appraisal Institute Annual Meeting (4)
  • Appraisal Institute blog (9)
  • Appraisal Institute Body of Knowledge (3)
  • Appraisal Institute chapters (1)
  • Appraisal Institute designation (5)
  • Appraisal Institute Designations (8)
  • Appraisal Institute Education (2)
  • Appraisal Institute Green Addendum (2)
  • Appraisal Institute media coverage (6)
  • Appraisal Institute volunteer opportunities (3)
  • appraisal legislation (4)
  • appraisal myths (3)
  • appraisal regulation (8)
  • appraisal threshold (5)
  • appraisal thresholds (4)
  • appraisal waivers (1)
  • appraiser diversity (1)
  • appraiser trainee (1)
  • Appraisers (8)
  • Arbitration (2)
  • arbitrator (1)
  • association management system (1)
  • automated valuation models (1)
  • AVM (1)
  • Bifurcated Appraisal (1)
  • big-box properties (1)
  • Call for proposals (1)
  • Candidate for Designation (3)
  • Candidate for Designation (3)
  • challenging appraisals (1)
  • co-op appraisals (1)
  • condo appraisals (1)
  • conservation easement appraisals (1)
  • conservation easements (1)
  • consumer appraisal information (11)
  • coronavirus appraisals (1)
  • designations (3)
  • desktop appraisals (1)
  • Diminution valuation (1)
  • exterior appraisals (1)
  • FHA appraisals (1)
  • FHA Handbook 4000.1 (1)
  • green valuation (9)
  • HERS Index (1)
  • HERS rating (1)
  • Highest and best use (2)
  • home appraisals (6)
  • home inspections (2)
  • Home Renovations (1)
  • Home Winterization Tips (2)
  • Hybrid Appraisal (1)
  • International outreach (1)
  • International Valuation Conference (5)
  • landscaping and appraisal (2)
  • landscaping and property values (2)
  • Main (10)
  • market analysis (3)
  • multifamily appraisals (1)
  • office building appraisals (1)
  • office property appraisals (1)
  • oil spills (1)
  • overhead transmission lines (1)
  • property tax appeals (3)
  • PUD appraisals (1)
  • relocation (1)
  • Residential Appraisal (1)
  • residential appraisals (8)
  • residential appraisers (4)
  • RMAT (1)
  • rural property (3)
  • social media for appraisers (2)
  • solar (1)
  • SRA designation (1)
  • TAF (1)
  • taxes (1)
  • technology and valuation (1)
  • testimony (1)
  • The Appraisal Foundation (1)
  • The Appraisal Institute (84)
    • Appraisal Institute Review Designations (1)
  • The Appraisal Journal (2)
  • timeshare appraisals (1)
  • transportation (1)
  • Trial preparation (1)
  • USPAP (1)
  • valuation careers (10)
  • volunteer (1)
  • Volunteers of Distinction (8)

RSS AI News

  • Appraisal Institute Debuts New and Improved Residential Education Offering March 4, 2021
  • Appraisal Institute, Fannie Mae, National Urban League Award Scholarships to Strengthen Diversity in Profession February 18, 2021
  • New Appraisal Institute Text Demonstrates Essential Valuation Techniques January 20, 2021

RSS Industry News

  • Student Housing Sector Strengthens as Deals Increase During Q4 2020, Data Shows February 17, 2021
  • Foreclosure, Eviction Moratorium and Forbearance Extended February 17, 2021
  • FHFA Extends Appraisal Flexibilities Due to COVID-19 February 17, 2021

Follow us

icon_youtubeicon_linkedinicon_twittericon_rssicon_facebook

About this blog

Opinions of Value provides the appraiser perspective on developments in the valuation profession, insight on legislative and regulatory issues and outlook on industry trends.
Terms of Use | Disclaimer | Guest Blogger Guidelines

Subscribe


Dotcomm Award

Copyright © 2021 · Genesis Child on Genesis Framework · WordPress · Log in