Bill advances that would bar discrimination in home appraisals

Lawmakers want to keep bias from deflating home values

By: - June 2, 2022 3:50 pm

Investigations have found real estate appraisals have lowered appraisals on homes based on the race of their owner. (Fran Baltzer for New Jersey Monitor)

A Senate panel advanced a bill Thursday that would bar real estate appraisers from lowering a home’s appraised value because of the race of the owner or buyer, and create steep penalties for those who run afoul of the safeguards.

Supporters say the bill, sponsored by Sen. Nellie Pou (D-Passaic), is a bid to bridge New Jersey’s racial wealth and homeownership gaps. A report released last month by the New Jersey Institute for Social Justice found homeownership rates among Black New Jerseyans are barely more than half that of white residents, 38.4% to 75.9%.

“Discriminatory home appraisals will continue to widen that gap and to rob Black and brown New Jerseyans of intergenerational wealth through homeownership without strong legislation,” Renee Koubiadis, director of New Jersey Citizen Action’s anti-poverty program, told lawmakers on the Senate and Urban Affairs Committee.

Black homeowners nationwide have reported they received higher appraisals for their properties when they did not let appraisers know their race.

The measure would expressly bar appraisers from artificially lowering a home’s appraisal because of the race of the owner, buyer, occupant, or their agents. Deflating an appraisal because of a party’s sex, national origin, and other classes protected by the state’s discrimination law would also be prohibited.

“We know that appraisal discrimination happens because we have seen a discrepancy between appraisals based on race,” said Sofia Rosa, a housing access organizer with the Latino Action Network Foundation. “All New Jersey residents should be able to equally benefit from home ownership, which is a primary driver of wealth in this nation.”

An appraiser found to have violated the prohibition would have their appraiser license suspended, be forced to pay a fine to recoup the costs of the appraisal, and face a separate civil penalty paid to the state. The suspension would be lifted after the appraiser pays a fine and attends a mandated anti-bias training course.

The legislation would also require the Department of Community Affairs to collect demographic data when it receives a complaint alleging a discriminatory appraisal and report that information to the Legislature by July 1, 2024.

Because mortgage lenders seldom offer loans worth more than a home’s appraisal, a low assessment can cost a home seller thousands of dollars or more.

If a buyer and seller agree upon a price above the appraised price, the buyer must either come up with the difference, or the two parties must agree on a lower price.

Junea Williams-Edmund, a Newark-based attorney, told the committee she had a buyer offer $240,000 for her home, but the appraisal came in at $195,000. They eventually settled on a $217,000 price.

“My Realtor had previously warned me that there were what he called ‘funky things’ happening with the appraisals in Newark at that time because the appraisers were essentially valuing the homes in Newark at a lower level than the market was dictating, resulting in these massive gulfs,” she said.

The same happened to her twice while she was searching for a new home. One was valued at more than $30,000 below her offer, and another was appraised more than $50,000 short, she said.

Because home values affect the appraisals of other residences in a given neighborhood, artificially low appraisals can deflate home values in entire communities. A task force on appraisal discrimination convened last year by President Joe Biden found predominantly Black neighborhoods have been on the receiving end of the phenomenon.

“Something that the task force specifically found was that, on average, homes in majority-Black neighborhoods are valued at less than half of those in neighborhoods with few or no Black neighborhoods, and accounting for neighborhood and property characteristics and amenities could not explain the disparity,” said Andrea McChristian, law and policy director for the New Jersey Institute for Social Justice.

Sen. Holly Schepisi, a Bergen County Republican, said she’s concerned about “draconian” penalties even if an appraisal unintentionally under appraises a home because of bias. (Daniella Heminghaus for New Jersey Monitor)

The Senate and Urban Affairs Committee cleared the bill in a 4-0 vote, with Sen. Holly Schepisi (R-Bergen) abstaining, saying she has concerns that amendments made to the bill at Thursday’s committee meeting could see hefty penalties imposed on appraisers who unwittingly undervalue a home, and keep appraisers out of some communities altogether.

The amendments removed a requirement the State Real Estate Appraiser Board find an appraiser “knowingly” made a discriminatory appraisal before imposing penalties.

“My concern is if we’re just jumping in with something that is so draconian on day one, that eliminates knowing standards, that really doesn’t spell out due process in this, that has a mandatory suspension of license, are we going to potentially have no appraisals taking place in the very communities where we’re trying to make appraisals fair?” said Schepisi, who practices real estate law.

She said individuals who unintentionally undervalue a home because of bias should face a fine, not a license suspension.

Sen. Troy Singleton (D-Burlington), who chairs the Senate Community and Urban Affairs Committee and is another of the bill’s sponsors, said Schepisi’s concerns make sense, adding he would pass them onto Pou.


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Nikita Biryukov
Nikita Biryukov

Nikita Biryukov most recently covered state government and politics for the New Jersey Globe. His tenure there included revelatory stories on marijuana legalization, voting reform and Rep. Jeff Van Drew's decamp to the Republican Party. Earlier, he worked as a freelancer for The Home News Tribune and The Press of Atlantic City.