Window to the Law: Ensuring Impartial Appraisals - Transcript
Welcome to Window to the Law, I’m Charlie Lee, Senior Counsel and Director of Legal Affairs. In this video, we’ll discuss how real estate professionals can help ensure that their clients receive an impartial and objective appraisal.
Whether purchasing, selling or refinancing a home, an appraisal is a critical element for these significant transactions. Lenders and home buyers and sellers expect and rely on the appraisal to provide an independent, fair and objective estimate of the market value of a home, and a successful deal hinges on them. It’s for this reason that appraisers are legally and ethically required to perform an appraisal with impartiality, objectivity, and independence and to comply with all laws and regulations, including fair housing laws.
However, you may be familiar with recent reports of Black homeowners, for example, initially receiving questionably low appraisals and then obtaining a higher one after removing personal effects from their homes. In fact, the Federal Housing Financing Authority recently reviewed millions of cases, and found evidence of potential race-related bias in thousands of appraisals. In response, an interagency task force was formed by President Biden, called Property Appraisal and Valuation Equity or PAVE, to develop recommendations to eliminate racial and ethnic bias in the appraisal process. In March 2022, PAVE released an action plan aimed at rooting out racial and ethnic bias in home valuations. Details about the plan can be found on PAVE’s website or on nar.realtor.
Real estate professionals including appraisers are required to uphold fair housing laws. In fact, REALTORS®, which includes appraiser members, are committed to uploading the REALTOR® Code of Ethics and Article 10’s prohibition from denying equal professional services or discriminating against any person based on race, color, religion, sex, disability, familial status, national origin, sexual orientation or gender identity.
To help your client obtain an impartial and objective appraisal, here are some tips and recommendations:
- When your client is selecting a lender, advise them to ask about the lender’s policies for preventing and addressing bias in appraisals, their criteria for selecting appraisers, and whether they require fair housing and implicit bias training.
- Second, provide the appraiser with relevant and objective data about the property, including comparable home sales, and to be available to answer their questions. Be clear that your intent is only to provide helpful information as to avoid any misinterpretation of improper influence.
- Third, if factual information about the property is incorrect or relevant comp data wasn’t considered in the appraisal, inform your client they can request a reconsideration of value or ROV from the lender.
- Next, if the ROV isn’t effective, your client can ask their lender to conduct an appraisal review, which is a formal evaluation of the quality of the appraiser’s work, or to obtain a second appraisal.
- Lastly, if you or your client suspects improper bias, either of you can contact the Appraisal Complaint National Hotline, or file a complaint directly with HUD, CFPB, state appraiser licensing and regulatory boards, and the local housing or civil rights authorities.
Thank you for watching this episode of Window to the Law.