Following are research highlights presented by Freddie Mac:

The appraisal gaps identified are not being driven by only a small fraction of appraisers — a large portion of appraisers who completed appraisals in both minority and non-minority areas generated statistically significant gaps.
Properties in Black and Latino tracts receive appraisal values lower than the contract price more often than those in White tracts — 12.5% of the properties in Black tracts receive appraisal values lower than the contract price compared to 7.4% for those in White tracts, leading to a gap of 5.2%.
As the concentration of Black or Latino individuals in a census tract increases, the appraisal gap increases. For example, as the population of Latino individuals increases, the appraisal gap for properties in Latino tracts increases from 7.7% to 9.4%.
Differences in comparable sale distances, comparable reconciliation, variances in comparable sale prices and possible systematic overpayment for properties by minorities can explain only a modest amount of the observed appraisal gaps for the minority tracts.

Analysis was conducted on appraisals for the purchase of a single family one-unit home. Numerous robustness checks from different perspectives were conducted as part of the analysis, including by appraisal type, occupancy type, property condition, housing trend indicated in the appraisal report and by urbanization level. In addition, analysis was conducted on the top 30 Metropolitan Statistical Areas. The patterns observed based on the aggregate national data mostly persist; thus, the appraisal gaps seem pervasive.

Instant Insights /

Appraisal Valuation Gap for Homeowners in Minority Neighborhoods Studied

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