How Appraisal Bias Can Impact Home Values
Appraisal bias occurs when a property appraisal contains data that unfairly discriminates against a homeowner, either consciously or unconsciously.
A recent study found that homes in minority neighborhoods are more likely to be appraised lower than the contract price. This not only robs the homeowner of equity but hurts the entire neighborhood as well.
Here's what to do when you receive an appraisal that comes in lower than expected, and you suspect appraisal bias:
1. Make sure the information in the report is factually correct.
Check the square footage, the number of rooms and other information to ensure that it's correct.
2. Review the appraiser's comments.
Look for language that refers to the ethnic or racial makeup of the neighborhood.
3. Closely examine the comps the appraiser used.
Ensure that the comps are within a mile of the appraised property. They should be close in age, condition, and with the same number of rooms as the appraised home. If they're not, you may be able to take issue with the report.1
Why Down Payments are Headed South
Until recently, the amount of money homebuyers produced as a down payment significantly increased.
Higher home prices have certainly contributed to this phenomenon – but so has competition. Some buyers increased the amount they put down during a bidding war to prove their solid financial status to the seller.
However, down payments have decreased in recent months because of the cooling housing market, higher rates, inflation, and widespread economic uncertainty. With less competition, homebuyers don't feel pressured to offer large down payments to secure a deal. Plus, the rising cost of goods and services, combined with higher monthly mortgage payments, are eating into homebuyers' budgets. This often makes it difficult to produce a large down payment.2
Some Wacky Real Estate Facts
In search of some conversation starters to share on social media or at your next networking event? Check out these weird facts about real estate that are really true.
1. You can stay in a lighthouse in the middle of the ocean.
The Frying Pan Shoals Tower was built in 1966 off the southeastern coast of North Carolina and was decommissioned in 2004. An individual purchased it for $85,000 at a government auction and turned it into a bed and breakfast. Guests arrive by helicopter and may spend their days deep sea fishing off its walkways.
2. McDonald's was built on real estate – not burgers.
In most business circles, McDonald's is considered more of a real estate company than a fast-food business. That's because it retains ownership of the land each location occupies, and charges its franchise owners monthly rent along with the standard royalties and franchise fees.
3. Housewarmings come from burning mortgage paperwork.
Before FHA mortgages and low down payments were introduced, homebuyers often paid 15-20% for a 5-10 year loan that would end with a hefty balloon payment. This made paying off a mortgage a big deal. The occasion would often be celebrated with an event where the new homeowner's mortgage documents would be burned – thus the term "housewarming party."3
Strategies to Kick-Start Productivity
Being productive and efficient means achieving the results you desire with minimal time and effort. Here are a few ways to optimize your day:
Reduce distractions.
Ask yourself what your biggest distractions are and reduce them as much as possible, setting time limits if possible. Social media, video games and news websites are usually the culprits.
Set measurable goals.
After you create actionable to-do lists that reflect your productivity goals, establish measurements so you can track your progress.
Optimize your workspace.
Eliminate clutter on your desk and within your workspace by utilizing ergonomics. In addition, be sure to use "away" settings on your devices during showings and meetings. This can help reduce notifications during your workday.4
Hackers' New Wire Fraud Scheme
Homebuyers and sellers are increasingly being tricked by scammers who are infiltrating real estate transactions by exploiting online meeting platforms such as Zoom and Microsoft Teams. Hackers break into email accounts, invite homebuyers to a virtual meeting, and advise them to initiate a wire transfer.
The hacker typically uses a still picture, claiming to be having audio and visual issues. The fraudulent instructions to wire money to the hacker's account can result in clients losing large sums of money they've saved to purchase a home.
To avoid this scam, take the following steps:
- Inform your clients and staff about wire fraud scams and describe how to identify them.
- Instruct your clients to always verify wire instructions in person or through a trusted phone number, not by email.
- Review your cyber-liability policies and make sure you have ample coverage in case an incident happens.5
Sources: 1businessinsider.com, 2themreport.com, 3theclose.com, 4theamericangenius.com, 5nar.realtor/magazine
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