LA County homes in majority Black or Latino communities twice as likely to be under-appraised

Experts say inequities "rob" families of wealth and stress the importance of awareness about problems in the appraisal industry.

ByAnabel Munoz and Grace Manthey KABC logo
Friday, December 2, 2022
LA homes in communities of color twice as likely to be under-appraised
Experts say the inequities are "robbing" families of wealth and stress the importance of raising awareness about the problems in the appraisal industry.

LOS ANGELES (KABC) -- Buying or selling a home can be a bridge to building wealth. Yet, many Black Americans are reporting a major stumbling block along the way.

An ABC Owned Television Stations analysis found that across the country, including Los Angeles, the under-appraisal of homes is more common in majority Black and Latino neighborhoods.

"It's not new in our community. Wouldn't be a surprise to anybody. What's surprising is the attention," said broker Mark Alston, who is a member of the National Association of Real Estate Brokers and chairman of the State of Housing in Black America Committee.

He has been in the business for more than 30 years and works in areas including Mid-City Los Angeles, Carson, Compton and others.

A story that became 'bigger and bigger'

Families like the Austins of Northern California pushed back when their homes were appraised significantly lower than expected.

Then the Austins changed one thing: They removed any trace of their racial identity.

"We had a conversation with one of our white friends and she was like, 'no problem. I'll be Tenisha,' " said Paul Austin.

The next appraisal came in roughly $500,000 higher.

Stories like the Austins' led to an 18-month investigation by KGO-TV journalist Julian Glover. "It's one of those stories that you start looking into and it just ballooned and becomes bigger and bigger," said Glover.

In "Our America: Lowballed," Glover shares the stories of several families who report similar experiences of racial discrimination in the appraisal process.

A history of undervalued homes

Locally in Los Angeles County, 4.4% of homes sold in predominantly Black neighborhoods and 5.4% of homes in predominantly Latino neighborhoods were under-appraised. That's compared to 2.4% in mostly white neighborhoods.

Alston believes it's more like 100%.

"It's every house in the neighborhood. It didn't just get undervalued. It's been undervalued since redlining was instituted in 1934, with the institution of FHA," Alston explained.

Sidney Loiseau owns an appraisal company, South Shore Appraisals, in Southern California and conducts appraisals across several counties.

"I think it really starts on my drive in," said Loiseau. "Are there parks there? Where the school is located? Once I pull up, what I'm doing is taking a look at the property from the street. So, I'm taking all my notes: what does the roof look like? What is the curb appeal?"

Our analysis found the vast majority of appraisers nationwide are white. In California, 70% of appraisers in the industry are white, versus 37% of the population.

Alston explained that after 2008, appraisal management companies became the buffer between lenders and appraisers.

"You get people coming into the neighborhood to do appraisals who are not familiar with the neighborhood, generally only know your neighborhood based on what they see on TV," said Alston, adding, "They're scared to be in your neighborhood, they're culturally insensitive and so they find less value in your neighborhood."

Competency is not only key, it's required

Appraisers should be competent to appraise specific types of properties and in the regions they work in, stressed Loiseau.

"Meaning, I know what markets I'm going into. I know what the market trends are, how to make the proper adjustments. I know if I'm crossing the street from neighborhood to neighborhood, what that does in value," he said, adding that it's critical to report it when you believe something was not right.

"As an appraiser, you can't even accept an assignment without first having competency in that market area," he said.

Loiseau said he and other Black and Latino bankers are discussing starting their own appraisal management companies.

"Because then, we can pick people who are qualified," he said.

Applicants' work could also speak to whether or not their past appraisals show any inequities, he added.

Loiseau and Alston are raising awareness about the bias in the appraisal industry and agree that government agencies have a responsibility to take steps toward meaningful solutions.

"I think it's a federal problem. Our state can help," said Alston. "Our state can set the pace. California put in place the first fair-housing legislation, the Rumford Act, that then became the model for the Fair Housing Act of 1968."

For Alston, a key word is "redress."

"I think 90% of the wealth of Black Americans is in the equity in their homes. When you under-appraise it, you've robbed them," he said.

Alston is part of movements to achieve redress. He helped inform an effort that led Evanston, Illinois to become the first U.S. city to approve reparations for Black residents - $25,000 toward mortgage payments or home repairs.

"Are we going to get some actual attention? Some actual work?" he asked.

"Our America: Lowballed" seeks to find those answers from leaders at the highest levels of government and highlight steps taken in different states including California.

Watch "Our America: Lowballed" beginning Dec. 2 on Hulu and on the ABC7 app wherever you stream: Fire TV, Android TV, Apple TV and Roku. The documentary also airs on ABC7 Saturday, Dec. 3 at 10 p.m.