Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California

Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California
Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California

Thursday, June 10, 2021

Race and Racism in Real Estate Appraisals - Mary Cummins, Real Estate Appraiser, Appraisal, Los Angeles, California

Mary Cummins, real estate appraiser, appraisal, Los Angeles, California, racism in real estate, race, racism, diversity, discrimination
Mary Cummins, real estate appraiser, appraisal, Los Angeles, California, racism in real estate, race, racism, diversity, discrimination

I just read an article about racism in the real estate appraisal industry. I'm not going to link to it because it's so misleading. The author who is not an appraiser or in the industry stated that because most real estate appraisers are white per one poll that means the real estate appraisal industry is "racist" against Black people. According to the same Appraisal Institute poll they cited most real estate appraisers are male, i.e. 77% vs. 21% female, when females make up 50.8% of the population. Does that mean all male real estate appraisers are misogynists who will appraise women's homes for less than men's homes? Obviously not. That's as ridiculous as the article I just read.

A very important thing to note is the disclaimer in the Appraisal Institute race chart, i.e. "U.S. appraiser population statistics were derived from the ASC National Registry as of Dec. 31, 2018. Additional demographic statistics were derived from Appraisal Institute studies conducted in 2016-2019 that were comprised of randomly selected AI and non-AI real estate valuation professionals. In Q1 2019, the Appraisal Institute invited 15,600 valuation professionals, resulting in 750 responses."

Appraisers in the ASC National Registry are only "State certified and licensed appraisers who are eligible to perform appraisals in federally related transactions." We're talking a small subset of all appraisers in the US. This is not all appraisers in the US. The results don't reflect the racial diversity of all appraisers in the US. It probably represents more successful, wealthier appraisers who are generally white men.

Appraisers in the Appraisal Institute are a even smaller subset of long time, wealthy, successful appraisers. The reason is because it costs a lot of money to become an AI appraiser. We're talking at least $15,000. It costs $370 just to join the group without even being an AI appraiser. These people are even more wealthy than ASC appraisers. They're more likely to be white men.

The appraisers they questioned for their poll on races of appraisers is clearly biased. They only asked wealthier appraisers. We do know that wealth correlates positively with the male sex and being "white." That means poorer people, women, Blacks, Latinos, new immigrants....were most likely excluded. Of course the results would show that most appraisers are white men. 

Let's get to the AI race numbers anyway. Per the Appraisal Institute based on answers to a question on "race," the responses were as follows for licensed real estate appraisers: 

Hispanic/Latino 4.3%
American Indian/Alaska Native .4
Asian 1.1
Black or African American 1.3
Caucasian or White 85.4
Multiracial .7
Prefer not to say 5.1
Other 1.7
Total 100%

Per the US most recent US Census, the responses were as follows. Keep in mind that this represents ALL people including babies, children, retired people, disabled, incarcerated, criminals convicted of finance crimes, people in comas... people who can't be appraisers. It does not represent all the people who could physically, legally, technically be real estate appraisers. Such a subset would more likely be white men based on wealth and income.

Hispanic/Latino, alone, percent 18.5%
American Indian/Alaska Native 1.3
Asian 5.9
Black or African American, alone, percent 13.4
Caucasian or White, alone, percent 76.3
Multiracial, percent 2.8
White alone, not Hispanic or Latino, 60.1
No prefer not to say category
No other category

Total = over 100% because of multiracial and multiple categories

We're not really comparing apples to apples here because of multiple categories including "prefer not to say" and the fact that it includes all people in the US. The population sample of appraisers was also highly skewed because of the limited appraisers they questioned. There still could be more white real estate appraisers than in the general population. In this instance someone tried to state that means appraisers are racist against Black people. Oddly enough people haven't said the same thing about real estate agents. I only see articles about appraisers. Let's look at those numbers and see how they compare. 

White  74.2%
Hispanic or Latino 12.3%
Asian 6.4%
Black or African American  5.0%
Unknown 1.8%
American Indian and Alaska Native 0.3%

Those numbers look pretty similar. They also look pretty similar to the population as a whole. There are more white people in the US than Latinos, Blacks, Asians. Does this automatically mean all white people are racists against Blacks? Of course not. The racial makeup of a population does not mean one race is racist against another specific race. There are also fewer Latinos, Asians, American Indians... They are not complaining today. 

Don't get me wrong. Racism definitely exists in the US. It's a huge problem. More Black people are murdered by police. More Black people are in jail. More Black people are falsely convicted of crimes. There definitely are appraisers who are racist just like in all other professions. My issue here is articles stating that because most appraisers are white similar to the US population as a whole means they definitely are racist toward Black people and intentionally low balling their appraisals. 

Based on experience the real reason people right now are yelling racism in real estate appraisals is because buyers are not getting their loans approved for purchases and are unable to make up the difference in cash. The same goes with refinances. Properties are not just selling over list. They are going under contract over the price of the highest sales in the area for similar homes. Appraisers can't appraise a home for higher than the highest similar closed sale. A similar home is +/- 15% size, within last three months, within a 1/2 mile radius, with same condition/upgrades, amenities (e.g. pool, 2 garages)... The appraiser must use the "most similar" comparables. We must bracket size and amenities. The lender made that requirement. Not the appraiser. We are just following orders and a mathematical formula. Buyers are being forced to make up any difference between the contract and the maximum loan allowed in cash.

Buyers, homeowners don't seem to understand the purpose of a real estate appraisal in the home buying process. If you want to pay 100% cash for a property, you don't need an appraisal. Pay whatever you like. If you want to make a down payment and have a loan, you need an appraisal to get the loan. The real estate appraiser works for the lender and not the seller, buyer or borrower. The lender is willing to loan a certain loan to value ratio (amount of loan / value of property) on property for a borrower with good credit, steady job, assets, cash, investments and a down payment. The purpose is to make sure that if the owner can't make the loan payment for whatever reason that the lender can foreclose and sell the property for enough money to cover the loan balance and all costs. 

The real estate agent is involved in the same transaction yet people aren't calling them racist. The racial makeup of real estate agents is about the same as appraisers. They are going after the appraiser even though it's the lender who is denying the loan. They could pay the difference in cash but they either can't or don't want to. They would call the lender racist but there is no one individual that represents the lender. It's easier to attack the appraiser who has a name and a face so that is what they're doing. 

If Black people want more Black appraisers to feel better represented, they need to become appraisers. If they are having a problem finding a mentor to get their hours, Black appraisers should form an organization to mentor and support Black trainees. Then Black people should only hire Black appraisers to support them financially. The problem finding a mentor has nothing to do with color. It has to do with the difficult trainee process. One article blamed the problem on white people which is totally false. ALL trainees have the same problem finding a mentor. I actually wanted to start a program to help new appraisers and mentor Latinos and Black people. When I found out how much time, money and hassles it would cost me, I changed my mind. Here's an article I wrote about the mentorship issues. 

FWIW I'm Latino and speak Spanish. I appraise properties in lower priced Black, Latino areas. I understand the issues as they relate to value. 

If your loan is denied because of an appraisal value, here's an article I wrote on how to appeal the appraisal. 

Mary Cummins of Animal Advocates is a wildlife rehabilitator licensed by the California Department of Fish and Game and the USDA. Mary Cummins is also a licensed real estate appraiser in Los Angeles, California.


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