Tag Archive for: appraisers

What does “bias” in appraisal really mean?

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What constitutes “bias” in appraisal isn’t always what you expect, according to an attorney who handles cases involving appraisers.

First, let’s start with a definition we can agree on: Objectivity in appraisals means analyzing data based on well-established principles, free from bias or external pressure.

Appraisers know what external pressure looks like. Anybody who’s been in the business for as long as I have knows all about the regulatory firewalls that were enacted following the 1980s S&L crisis (FIRREA) and the 2008 financial crisis (Dodd-Frank, HVCC). There’s lots of disagreement on the legacy of these regulations, but they were undoubtedly created to address the perception of undue pressure on appraisers from financial institutions or other parties involved in transactions.

Now let’s zoom in on bias. This topic does NOT inspire feelings of neutrality in the appraisal community. That non-neutrality comes out (a bit explosively) in comments threads and appraiser forums, and sometimes even in the classroom. I’ve sat in on several of Peter Christensen’s in-person classes on bias and fair housing law, and invariably somebody in class pushes back. Sometimes the air gets pretty hot and hostile. But Peter always handles the pushback with calm and aplomb. He hears folks out, responds respectfully, and steers the conversation back to his thesis — that bias exists, and it can take forms that we don’t necessarily expect.

In a brief interview I did with him (see the video below), he tells a story about a case he handled, in which an appraiser’s report was found to exhibit bias to a homeowner whose political views he loathed. Peter tells this story in his class, and it always surprises people, because they’ve seen this divide in their own lives and can imagine something like this actually happening.

I thought I knew what bias looked like, but I’ve begun to realize that it can creep in when we’re least expecting it. —Hal Humphreys

I thought I knew what bias looked like, but I’ve begun to realize that it can creep in when we’re least expecting it. Recently I was laughing to a colleague at the notion of “luxury vinyl” plank flooring. “That’s an oxymoron,” I scoffed. “How can vinyl be ‘luxury’?”

“You just showed bias,” said the colleague. And I realized he was right. Lots of builders and consumers love LVP. It’s waterproof, low-maintenance, and easy to install. Some of it looks pretty good. I do NOT love it, and I probably won’t put it into my own house. I’m old school: I love hardwood floors and porcelain tiles, and I’ll splurge on nice materials whenever possible. But my flooring bias should never creep into my valuations. I shouldn’t assign a home a lower quality rating solely because it includes LVP. If buyers value it, that’s what counts.

The takeaway: you might harbor biases without realizing that’s what they are. They may seem innocuous, but they may sneak into your analysis all the same. That’s why I love how Peter Christensen approaches his class on valuation bias and fair housing law: He comes at it from an angle you won’t expect. He doesn’t accuse or shame anybody; he tells stories of how bias crops up in the real world — in the history of real estate, and in lawsuits and appraisals that have been challenged. He’s defended appraisers in matters before HUD and involving the CFPB, so he know how these cases play out, and he shares those stories in his class. His tone is one of deep experience, genuine curiosity, and intellectual humility.

Check our course catalog for Peter’s 7-hour class, Valuation Bias & Fair Housing Laws and Regulations. We’re running this course about every eight weeks this fall and winter, and the frequency will most likely pick up early next year.

Which brings me to some intel about a new CE requirement: I flinch a little when I mention this, because we’ve gotten some very angry (and even profane) responses when we’ve informed folks that the AQB has made this 7-hour class on bias and fair housing laws and regulations mandatory for licensed appraisers effective on January 1, 2026. Don’t murder the messenger. We’re not telling you what to do — we are not an all-powerful body with the power to mandate things. We merely inform, and so we’re just letting you know what the AQB has mandated.

If When you take this class, I predict you’ll discover that bias cases aren’t always what you expect, and you’ll learn what you didn’t know you didn’t know about fair housing laws. Maybe you’ll come away ready to challenge your own assumptions and rethink your definitions of bias and objectivity. I just ask you, humbly, to keep an open mind. Watch the video below to learn more.

 

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The New UAD and What It Means for Appraisers

A Q&A with AeL Partner Hal Humphreys about the New UAD Redesign and Changes in the Industry

If you’re reading this, you probably know by now that appraisers are bracing for a sea change in how they build appraisal reports. But in case you’ve missed it, here’s a news flash: the 1004 form is going away, and appraisal reports as we know them will soon change forever. 

Why is this happening? The simple answer is that big organizations like Fannie Mae and Freddie Mac are leading a shift away from rote form-filling and toward an appraisal process that’ll be more focused on understanding and analyzing data. 

AeL partner and Appraisal Buzzcast host Hal Humphreys is a veteran appraiser and instructor who’s been paying attention to the industry chatter on social media and in CE classrooms and conferences nationwide. He’s gotten an earful from appraisers who are apprehensive about the industry’s future. Our new employee Heidi sat down with Hal via Zoom to ask what kind of resistance he’s seeing among fellow appraisers to the coming changes, what the implications of these changes are for the industry, and how appraisers can adapt their expertise to thrive as analysts in a quickly evolving valuation market.

This interview has been edited for length and clarity.

 

Appraiser eLearning: With the GSEs phasing out the 1004 form, what are the implications for appraisers? 

Hal Humphreys: I’d characterize the shift as colossal. It’s a whole new sport. With this new UAD rollout, appraisers will have to show their work in lending reports, requiring proficiency in analytics — a departure from their previous practice. This could involve methodologies like paired sales analysis or using statistical software. 

I believe it’s crucial for appraisers to enhance their data analytics skills and their ability to articulate statistical analysis. Ultimately, these skills are essential for drawing precise conclusions from sampled data.

AeL: What challenges do you anticipate appraisers might encounter as they transition from standardized form-based appraisal practices to a more nuanced analytical approach?

Hal: Having just returned from the ACTS Conference in Colorado, I noticed the appraisers that show up to conferences are the appraisers getting their heads around this shift. The data analytics stuff is not gonna be difficult for them because they’re already trying to do it. 

Some appraisers are still under the misconception that the new UAD is just another version of the 1004 form. The thing is: it’s not a form, and it’s not just learning how to do a new thing. It’s going to be a 6- or 8-month learning curve to get their head around how this works.

AeL: Can you elaborate on the importance of analytical skills in the future of real estate appraisals?

Hal: The basic math appraisers are expected to do is not terribly difficult — I don’t think anyone is expecting appraisers to do multiple linear regression analyses. What they want is for appraisers to look at a piece of property and determine if the market is increasing and to have support for the increased adjustment to the sales. I believe it’s going to be a matter of better understanding how to use factual verified data. It has to be verified. USPAP uses the word “must” a grand total of three times, always in the same context. Every time it says, “An appraiser must collect, verify, and analyze all information necessary for credible assignment results.” We must gather the information, we must verify it, and we must analyze it. 

There are a number of ways appraisers can use data analytics to extract adjustments from market information: They can use a depreciated cost analysis to identify specific adjustments for different items such as a deck versus a concrete patio, one fireplace versus two fireplaces, etc. Scott Cullen teaches how to do that at Appraiser eLearning, and has a software product called Solomon Adjustment Calculator that relies heavily on the depreciated cost.  

I’ve spoken with folks at different GSEs, and they’ve identified plus or minus 35 tools to help appraisers with data analytics. But the appraiser has to understand the basic theory and math behind the tool they’re using, and they’re responsible for what the software kicks out.

This data-driven approach opens up a whole world of appraisal work appraisers could do without fear and trepidation. If I were an appraiser solely focused on lending work, and then the market began to slow down, embracing data analytics and statistical analysis could revolutionize my practice. 

AeL: Do you foresee potential resistance or reluctance within the appraisal community to adopt these new changes? And if so, how might that resistance be addressed?

Hal: Yes, I do. But we are going to be switching to the new UAD. We do not have a choice. And it’s a perfect opportunity to learn how to integrate some of these tools. I’ve heard that some of the software providers will be providing an interface to build a report that then goes to the UAD. They’re all working on various tools to either integrate directly into their product or have an API handshake. 

During a recent conference, there was some resistance to the tune of: “USPAP doesn’t require me to show my work. Why are you asking me to show my work?” The answer came from the chief appraiser for the VA, who said something like: “You’ve done the work. You’re saying it’s in your work file, then show your work. It doesn’t take any more time.” 

What to say to appraisers who have concerns? We simply have to roll up our sleeves and adapt because change is inevitable. Appraisal work, especially in the lending sector, is undergoing shifts to meet the requirements of entities like Fannie Mae and Freddie Mac. And it’s worth noting that there’s a vast landscape of appraisal opportunities beyond lending, many of which demand even more rigorous documentation and explanation of methodologies. Rather than viewing these changes as obstacles, they could be opportunities to enhance the professionalism and credibility of our field. 

AeL: What do appraisers stand to gain from beefing up their analytical skills and embracing a more data-driven approach to valuation?

Hal: This data-driven approach opens up a whole world of appraisal work appraisers could do without fear and trepidation. If I were an appraiser solely focused on lending work, and then the market began to slow down, embracing data analytics and statistical analysis could revolutionize my practice. 

By integrating these skills into your reports, you transition from merely meeting minimum requirements to becoming a more proficient appraiser. This data-driven approach not only enhances lender work but also opens doors to diverse appraisal opportunities, such as divorce or litigation cases. Currently, the only people taking divorce or litigation assignments are the ones already comfortable showing their work and using data analytics to validate their conclusions. Understanding data analytics equips you to handle a broader range of assignments with confidence, even during market slowdowns. While the adjustment may be challenging for some initially, it ultimately leads to significant professional growth and expanded opportunities.  —Heidi Reuter

 

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The Gift of Time

Bryan Reynolds reflects on the importance of taking the time to show loved ones you care.

My older brother Todd and I used to get together for lunch a couple of times a month. Sometimes we’d get sentimental and talk about the good old days, when we were kids. We had the best childhood on the planet — thank you, Mom and Dad.

My dad was a great man. He’s been gone more than 25 years now. He was home every night at 5:30, and we had dinner as a family. There were no iPhones back in those days. We’d sit around the kitchen table, and then we’d retire to the family room and watch TV. On weekends, we would go to my grandmother’s house. I called her “Mamoo.” She was a heavyset lady with gray hair, always up real high. She was a delight.

Anyway, at one of those lunches, Todd and I got to talking about the old places. We drove by our grandparents’ house, Mamoo and Papaw’s. And then we drove over to the house where the five of us lived until I was nine. Little bitty house, about 900 square feet. Three bedroom, one bath. And Todd and I were sitting there in front of the house, staring at it and talking about memory. Todd drove on, and then he did a U-turn and pulled up in front of a neighbor’s house. “Let’s go say hi,” he said.

In our neighborhood there were three families who’ve lived in the same three houses for 50 years. Most people move every seven years or less. So we knocked on the door. And sure enough, here came Mike Barnhart, our old baseball coach, answering the door in his little shorts. Mike was a sergeant in the Marines. Tough guy. And he said, “Get in here, boys. I’m just back here folding laundry.”

I hadn’t seen this man in 30 years, but he immediately recognized us and invited us inside.

We chatted with Mr. Barnhart for more than two hours while he folded laundry. He showed us pictures of his son and grandkids, you know, having that proud grandpa moment. He had an oxygen tank with him, and he said, “My doctor wants me on that, but I’m not doing it.” And we just had a wonderful talk. Todd and I are both busy guys, and we didn’t really have time for an extended visit. But the time flew by, and we left feeling great.

About a week later, Todd texted me while I was lecturing in Nashville. I called him during a break. “What’s up?” I said.

“You’ll never believe this,” he said. “Mike Barnhart just died.”

He was right. I couldn’t believe it.

We went to the visitation. Afterward, we were having a drink in remembrance of Mr. Barnhart, and his son came up to us. He said, “Hey guys, you’ll never believe how dad went on and on about you guys just randomly showing up at the front door and visiting with him. That really made his day. Thank you for doing that.”

Do something TODAY to let others know that you care about them. They won’t be here forever.

So here’s what I want to say: Take some time out for the people you love and care about. Go visit someone, write a card. Or best of all, go see them in person and give them a hug. Have a conversation with them. If you can’t do that, call them.

Another cool thing is old school. Not an email, not a tax, not a Snapchat. Not Instagram. Not Facebook.

Send a letter.

I got one in March of 2021. I still have it.  It was just a little note. It said, “Brian, I have no idea how you find the time to do all that you do. But I really appreciate what you do for appraisers and the appraisal profession. Thank you, DW.”

Thank you, Danny Wiley. That meant a lot to me. And I’ve kept it. It’s in my desk.

I encourage you to reach out to somebody you care about. Maybe it’s a business associate. Maybe it’s a family member.

I’m not a writer. But many years ago, I wrote to my grandmother — just a little note to say, “Hey, thinking about you and the last time I drove you around to see Christmas lights. When’s the last time you saw Christmas lights?”

So my dad picked her up that year for Christmas dinner and took her out for a drive to see the neighborhood Christmas decorations. And then, the year she turned 85, we surprised her and picked her up in a limo bus. We drove around and asked her to show us where she grew up. “I want to see the little house on Cottage that you talked about so often,” we said. “Let’s go down by 4th Street. Show us that house, and show us the one on 3rd Street where you lived in a basement when you were first married and had Todd.” I think her favorite part of the weekend was that drive. Not the dinner, not the gifts. Just having the family together and being heard.

So I encourage you to take the time to go visit somebody, write a letter, make a phone call. If it’s got to be a text, do that. Life is short. Time slips away from you.

I’m going to do better. I’ve got these really cool Appraiser e-Learning note cards, and I’m going start writing notes to people. You should do the same. Take the time out to do something for your loved ones. Write a note, send a silly gift. Candy Cooke sent me a crystal ball one time, and that was a lot of fun. (Thank you for that, Candy.)

We get busy. We feel the pressure to meet deadlines and make a living. But the reason we’re here is people. That’s what it’s all about. Do something TODAY to let others know that you care about them. They won’t be here forever. You may just make their day. And what if, by chance, that day happens to be one of their last here on Earth?

You’ll be glad you took the time.

This essay was adapted from Episode 177 of The Appraisal Update Podcast.
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