The Biden Administration just revealed a new two-pronged plan to help bring more equality to the home appraisal process.
First, the White House wants to establish a rule to include “nondiscrimination quality control standard” in algorithms used in the appraisal process. Second, it wants to lower the educational standards required to become an appraiser, which is statistically one of the least diverse career paths.
A home appraisal is the process by which a neutral third party, known as an appraiser, determines the value of a house or property. This step is critical for those looking to buy, sell, or refinance a home. Knowing your home’s value ultimately determines the size of a loan you can get, the price you can sell it for, and more.
Home appraisals are supposed to be neutral and unbiased. But according to a 2018 study by the Brookings Institution, homes in Black neighborhoods are worth an average of 23% less than homes in neighborhoods with “very few or no Black residents.” This suggests that Black homeowners are more likely to see their property undervalued, making it harder to build wealth.
Only 5% of appraisers are people of color, which could contribute to that phenomenon.
For many Americans, owning a home is key to wealth accumulation. But if your property is unfairly valued, it could wipe out years of price appreciation. Additionally, a lower home price makes it harder to get loans, refinance, or make a profit when you sell.
By changing appraisal algorithms and removing the “unnecessary barriers” required to become an appraiser, the White House is hoping to encourage more people of color to choose this career path. And, by helping to ensure that those conducting home appraisals are in touch with the communities they serve, it hopes to make wealth building more accessible for all.
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