NCRC: ‘Mystery Shopper’ Study Shows Bias in Appraisal Industry

A report issued by the National Community Reinvestment Coalition has revealed bias in the appraisal industry, an issue currently being studied by the NCUA.

David Baumann


Oct 26



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Report released by National Community Reinvestment Coalition highlights issue currently being studied by NCUA.

Having employed “mystery shoppers” in an investigation, the National Community Reinvestment Coalition reported Tuesday that racial bias continues to plague the home appraisal industry.

Using inter-racial couples in the Baltimore, MD area, the NCRC hired appraisers to evaluate homes owned by the couples. In some cases, an appraiser was led to believe the homeowner was Black and in other cases, an appraiser was led to believe the owner was White. Fourteen different appraisals were conducted in seven tests.

The NCRC reported that appraisers assigned higher average monetary values when they believed the home was White-owned. White testers further received valuations $7,000 higher on average than their Black partners who showed the same home. The racial discrepancies were as high as 9% and 13% in two cases, according to the group.

Background and NCUA Involvement

A Biden Administration task force that included the NCUA has called for changes in the appraisal industry, including efforts directed at increasing diversity among appraisers.

NCUA Chairman Todd Harper has said the agency is studying how to combat discrimination in the appraisal industry and that the Federal Financial Institutions Examination Council also has tackled the issue.

Inside the Report

Huge changes are needed in the appraisal industry, according to the NCRC.

“The severity and subtlety of racial bias captured in our findings suggest that it will take sweeping and aggressive action from both policymakers and the industry itself to rid the appraisal marketplace of discrimination,” the coalition stated, in its report.

“The discrimination we found in the appraisals system undermines Black wealth-building and almost certainly violates the law,” NCRC President and CEO Jesse Van Tol said, as the findings were released. “It is unacceptable for appraisers to undercut the value of homes and conduct themselves less professionally when dealing with Black homeowners.”

The coalition reported that in some instances, Black mystery shoppers received unprofessional service, such as drawn-out processes, poor communication and, in one case, a homeowner was never contacted by the appraiser following the evaluation. The White partners were spared such poor service.

Changes Recommended

In releasing the report, the NCRC called for more testing and made several additional recommendations, including that: 

–Incentives be created to recruit a more diverse apprentice pool;

–Appraisal companies be required to report demographic information about clients and valuations, which, the NCRC said, would create far more accountability in the industry;

–A more effective process be developed to allow homeowners to seek reconsideration of their appraisals;

–Fair housing training be required as part of the appraiser licensing process;

–Funding be increased for enforcement resources;

–Industry standards be developed for fair appraisals.

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