What Is Appraisal Bias?
Appraisal bias occurs when a property’s valuation is influenced by factors unrelated to its actual worth – often the demographics of the homeowner or neighborhood. In practice, this means two identical houses could be appraised differently based on who lives there or the community’s racial makeup. Unfortunately, research and real-world stories confirm that this is happening. A striking example is the case of a Black couple in California who suspected their home’s low appraisal was due to race. They removed family photos and had a white friend stand in as the homeowner for a new appraisal – and saw the value jump by nearly $500,000 npr.org. This well-publicized incident isn’t isolated; similar “whitewashing” stories have emerged nationwide, highlighting a systemic issue.
Empire Learning is making it easier (and more affordable) to knock out your real estate continuing education. We're offering a 100% FREE CE course to help you get started—no strings attached. Whether you're getting ahead of your renewal or exploring a new topic, this is a perfect way to try out our top-rated online platform.
👉 Enroll now and experience the Empire difference—clear content, flexible access, and support when you need it. Because getting your CE done shouldn’t be a hassle.
By the Numbers
Studies show that homes in majority Black or Latino neighborhoods are significantly more likely to be appraised below the agreed-upon contract price than those in mostly white areas. According to an analysis of Freddie Mac data, about 12.5% of homes in majority Black neighborhoods and 15.5% in majority Latino neighborhoods were undervalued (appraised for less than the contract price), compared to only 7.4% of homes in majority-white neighborhoods brookings.edu. In other words, properties in communities of color are more than 1.5 times as likely to get low appraisals versus similar homes in white communities brookings.edu. Over time, this contributes to huge equity losses. One Brookings Institution report estimated that appraisal bias has cost Black homeowners billions in cumulative wealth, accounting for a significant portion of the value gap in Black neighborhoods brookings.edubrookings.edu.
Impact on Transactions
For real estate agents, appraisal bias can derail deals and harm clients. A biased low appraisal might cause a mortgage lender to reduce the loan amount or cancel the financing, blowing up a sale through no fault of the buyer or seller. It’s deeply frustrating – the seller loses out on fair value, the buyer loses the home they wanted, and you lose a commission. Even beyond individual deals, these patterns discourage minority homeowners and buyers, feeding a cycle of disenfranchisement. As an agent, being aware of this possibility is critical, especially when working in diverse areas or with clients of color who may be justifiably concerned about the appraisal process.
What Can Agents Do?
First, be vigilant. If an appraisal comes in far below expectations without clear property-related reasons, consider that bias (conscious or not) could be a factor. Agents can help by providing solid comps and data to challenge a questionable appraisal – essentially, arming the buyer (or seller) to request a Reconsideration of Value from the lender. It’s also wise to attend the appraisal inspection when possible, to point out selling points and ensure nothing is overlooked. Secondly, educate your clients. Let buyers and sellers know this issue exists so they don’t internalize a low valuation as their “fault.” In some cases, a second appraisal might be warranted.
Build stronger client relationships and serve your community with greater awareness. Empire Learning’s Cultural Competency and Implicit Bias (4-hour) CE course—available exclusively in New York—helps real estate professionals recognize and address unconscious biases while deepening their understanding of cultural values, norms, and challenges. This course fulfills both the implicit bias and cultural competency requirements, empowering you to foster trust, communicate effectively, and navigate today’s diverse marketplace with confidence and respect.
Industry Progress
The real estate industry and government are taking steps to address appraisal bias. In 2022, a federal task force (PAVE – Property Appraisal and Valuation Equity) released an action plan to combat bias, including improved training for appraisers and stricter oversight of appraisal practices. Major appraisal organizations are now responding: one leading trade group announced it will require appraisers to take a new 7-hour course on fair housing laws and avoiding bias jacksonlewis.com. This course devotes substantial time to how appraisals can inadvertently perpetuate discrimination and ways to prevent it jacksonlewis.com. As of 2023, implicit bias training is also mandatory for real estate license renewal in some states (e.g. California), which means agents and brokers are learning about appraisal bias as part of their continuing education jacksonlewis.com.
Bottom Line
Appraisal bias is a reality agents must be aware of. By knowing the data and watching for red flags, you can better advocate for your clients. If a low appraisal smells “off,” don’t hesitate to speak up – help your client compile market evidence to challenge it. Make sure your sellers understand they have options if they believe an appraisal is unjust. And on a broader level, support efforts (like training and policy changes) that aim to make home valuations fairer. Not only is this the right thing to do for equal opportunity in housing, but it also ensures your deals aren’t undone by someone else’s bias.
To Learn More...
For real estate professionals, understanding these concepts can be particularly valuable during discussions with clients about why REALTORS® and real estate agents are knowledgable professionals.
If you’re preparing for your Real Estate Continuing Education or looking to enhance your knowledge through a Real Estate Course, topics like Healthy Homes can help set you apart.
As part of your License Renewal Course or other Real Estate CE efforts, staying informed on foundational property concepts can make a big difference in your expertise and client relationships.