New Report Highlights Just How Much Racial Bias Impacts Home Appraisals

A home appraisal is an unbiased, expert opinion on the value of your home. That is, unless you live in a neighborhood where there's no white families.

According to new research by sociologist Dr. Junia Howell, done exclusively for Bloomberg CityLab, homes in white neighborhoods are often appraised for far higher values than those in identical neighborhoods, but with families of color.

The racial penalty

In her 2022 study, Dr. Howell found that the "racial penalty" -- that is, the difference between white and non-white home appraisals that cannot be attributed to anything intrinsic to the home or neighborhood -- averaged $408,000 in 2022. Again, this is a difference of hundreds of thousands of dollars simply because the home has an address in a non-white neighborhood.

Even more alarming is just how much this appraisal gap has widened since 2013. In a previous study, Dr. Howell and Dr. Elizabeth Korver-Glenn, author of Race Brokers: Housing Markets and Segregation in 21st Century Urban America, found that the racial appraisal gap in 2013 was roughly $211,000, with white neighborhoods enjoying mean appraisals of about $432,300 and communities of color getting $221,000.

In 2022, communities of color were seeing mean appraisals of $409,500, with white neighborhoods enjoying nearly double that at $817,500 -- again a difference of roughly $408,000. That means, homes in white neighborhoods have appreciated by almost $200,000 more since 2013. Not only that, but the $409,500 mean appraisal that communities of color were receiving in 2022 was about $22,800 less than what white neighborhoods were getting in 2013 ($432,300).

Here's how the difference in mean value appraisals have changed for the two communities since 2013.

What this means is that white homeowners in white neighborhoods are earning equity and building wealth faster than those in communities of color, widening wealth divisions that have never historically been in parity.

Can you dispute a home appraisal?

Yes, you can.

Appraisers are not immune to errors of judgment, but they do have a legal responsibility to assign value based on data, market trends, recent sales of similar properties, and their own expertise. Since it's illegal under federal law to assign less value to a home because of racial prejudice, you can take legal action if you're a victim of discriminatory appraisals.

Sometimes, however, the problem isn't the appraiser's judgment; rather, it's the limited appraisal methods they're using. One of the most common ways of appraising homes is to perform what's called a comparative market analysis (CMA). This involves comparing the home in question with recently sold homes of the same size and features. If similar homes in your neighborhood sell for $409,000, then the appraiser would likely give your home the same value, even if the same house sells for double in a white neighborhood.

In this case, you could request a second appraisal, especially if the appraiser values the home lower than the buyer's asking price. Since lenders don't usually lend above the home appraisal, it could be vital to a buyer's mortgage approval process to have another expert appraise the home.

If a lender has discriminated against you, you can file a complaint against them with the Consumer Financial Protection Bureau. You can also contact the Property Appraisal and Valuation Equity (PAVE) taskforce for discriminatory appraisals and the agency will connect you with a fair housing specialist.