--- title: Freddie Mac Confirms There's a Major Racial Gap in Home Appraisals description: A new study from Freddie Mac shows a race gap for home appraisals, and Black and Latino homeowners are the ones discriminated against. authors: - name: Julia Glum role: Managing Editor url: https://money.com/author/julia-glum/ bio: Julia Glum joined Money in 2018 and specializes in covering financial trends that affect everyday Americans' wallets. She also writes Dollar Scholar, a weekly newsletter that teaches young adults how to navigate the messy world of money. education: University of Florida at_money_since: 2018 articles: 453 covers: - Housing - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - Newsweek - International Business Times - CBS News - Good Morning America - WUSA9 - Pix 11 - The New York Times - Mashable - The Washington Post - CNBC - Politico social: - https://x.com/superjulia - https://www.linkedin.com/in/julia-glum published: '2021-09-23T17:33:44.000Z' modified: '2024-01-10T14:14:56.000Z' section: Housing tags: - News word_count: 637 canonical: https://money.com/freddie-mac-home-appraisals-racial-gap/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Realtor shows data on tablet to a interracial couple during a home appraisal](https://img.money.com/2021/09/News-Race-Gap-Home-Appraisals.jpg) Homeownership is a key part of the so-called American dream — you know, the steady-job, happy-family, white-picket-fence ideal everyone's supposed to strive for. But for buyers and sellers in many communities, a pervasive racial gap in appraisal values is making it harder to achieve the dream of building wealth through homeownership. Research out this week from government-sponsored loan corporation Freddie Mac confirmed that appraisal values are more likely to fall below contracted sale prices in neighborhoods with lots of Black and Latino residents. Freddie Mac's Michael Bradley said in a [news release](https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-research-explores-causes-appraisal-valuation-gap) that these low appraisals could cause some families to struggle to get the financing they need. Others may miss out on financial benefits of ownership, because when a home is appraised for less than the agreed-upon sale price, buyers often back out or try to negotiate a lower price. "This is a persistent problem that disproportionately impacts hundreds of thousands of Black and Latino applicants," said Bradley, the senior vice president of modeling, econometrics, data science and analytics in the single-family division. ## How home appraisals work Home appraisals typically involve a professional visiting a property, doing a walk-through and coming up with a dollar figure for its value. Used by mortgage providers to decide how much to lend on a property, appraisals are intended to be unbiased, focusing on factors like location and condition. Mismatches between an appraisal and the sale price can be [difficult to navigate](https://money.com/coronavirus-low-home-appraisal/) — and sink deals. In theory, appraisal discrimination based on race, gender, religion and national origin is illegal. But in practice, a series of news articles recently have found that appraisals may not be 100% objective. Last August, for example, *The New York Times* [published a story](https://www.nytimes.com/2020/08/25/realestate/blacks-minorities-appraisals-discrimination.html) about a white man and a Black woman in Florida who were shocked to get a $330,000 valuation on a house they felt was worth more around $450,000. When the couple got it appraised again — after taking down family photos, hiding their Toni Morrison books and having the husband answer the door — the valuation was $465,000. The Freddie Mac study was intended as a follow-up to these reports. After looking at 12 million appraisals for purchase transactions between 2015 and 2020, it appeared to uphold the anecdotal evidence. "Appraisers' opinions of value are more likely to fall below the contract price in Black and Latino census tracts, and the extent of the gap increases as the percentage of Black or Latino people in the tract increases," it said in a [research note](http://www.freddiemac.com/research/insight/20210920_home_appraisals.page)**,** referring to neighborhoods where the share of Black or Latino residents was 50% or higher. Some 15.4% of appraised homes in Latino areas and 12.5% of homes in Black areas were less than contract price, compared to just 7.4% for white areas. In response, Rodman Schley, the president of the [Appraisal Institute](https://www.appraisalinstitute.org/), acknowledged in a statement that "unconscious bias is real and exists in all industries." However, he said, it's something they're trying to fix. Other real estate groups are pursuing initiatives to shrink the racial gap in homeownership, as well. The federally backed mortgage company Fannie Mae [rolled out a tool](https://money.com/rent-payments-mortgage-qualify-fannie-mae/) earlier this month that lets lenders see applicants' on-time rent payments as a way to supplement their credit history. "Appraisal is one piece of a larger ecosystem, and appraisal groups are working alongside consumer groups, real estate brokers and agents, banks, government agencies, think tanks and others to explore where housing inequities may stem from and what combination of solutions should be considered," Schley added. ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/freddie-mac-home-appraisals-racial-gap/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Housing", "item": "https://money.com/housing/" }, { "@type": "ListItem", "position": 3, "name": "Appraisal", "item": "https://money.com/appraisal/" }, { "@type": "ListItem", "position": 4, "name": "Freddie Mac Confirms There's a Major Racial Gap in Home Appraisals" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/freddie-mac-home-appraisals-racial-gap/#webpage", "url": "https://money.com/freddie-mac-home-appraisals-racial-gap/", "name": "Freddie Mac Confirms There's a Major Racial Gap in Home Appraisals", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2021-09-23T17:33:44.000Z", "mainEntity": { "@id": "https://money.com/freddie-mac-home-appraisals-racial-gap/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/freddie-mac-home-appraisals-racial-gap/#breadcrumb" }, "dateModified": "2024-01-10T14:14:56.000Z" }, { "@type": "NewsArticle", "headline": "Freddie Mac Confirms There's a Major Racial Gap in Home Appraisals", "articleSection": "Housing", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2021/09/News-Race-Gap-Home-Appraisals.jpg", "width": 2660, "height": 1773, "caption": "News-Race-Gap-Home-Appraisals" } ], "author": [ { "@type": "Person", "name": "Julia Glum", "url": "https://money.com/author/julia-glum/", "@id": "https://money.com/author/julia-glum/#author", "description": "Julia Glum joined Money in 2018 and specializes in covering financial trends that affect everyday Americans' wallets. 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