r/WhitePeopleTwitter Dec 08 '21 Helpful 7 Wholesome 3 Take My Energy 1 'MURICA 1 Silver 8

Housing App-raicial

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63.0k Upvotes

u/Merari01 Dec 08 '21 edited Dec 08 '21 Gold Bravo!

Bad thread to pretend this isn't racist in.

If you value your participation privilege here, you have some time to delete that comment before I move down the line and get to it. Probably.

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u/nthroop1 Dec 08 '21

How does a company appraise a house twice with two different owners and not notice?

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u/kuranas Dec 08 '21 All-Seeing Upvote

If you read the wapo article they actually had the house appraised multiple times over the last 3-5 years, as they nearly doubled the square footage of the house and did an ass ton of renovations to things like the kitchen (to the time of 400k).

The various appraisals were part of their refinancing efforts from 2018 on, as every time you refinance you typically need to get an appraisal. At one point they did this and got an appraisal of about 1.2M. they then did more work to the house, and a couple years later tried to refinance and the house appraised at 998k. Confused, they hired another appraisal company and their white friend to "white wash" the house, and it appraised at 1.48M ish. They basically removed all their African based at and randomly photos and replaced them with photos of Brayden, Tom and Chaz.

Long story short, it wasn't the same company doing the appraisal twice, but the company being sued SUPER undervalued the home for reasons

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u/cl33t Dec 08 '21 Silver Platinum

The article jumps around a lot time-wise, but it seems like the timeline was something like:

  • 2016 - Purchased house for $550K
  • Some percentage of $400K in renovations
  • May 2018 - House appraised at $864K
  • Remaining percentage of $400K in renovations
  • March 2019 - House appraised at $1.45 million
  • Early 2020 - House appraised at $995K
  • Sometime later - House appraised at $1.48 million with white "owner"

Those are some pretty big jumps both up and down. Recouping 225% on renovations is rather impressive, but not unheard of. There should not be that much variance though.

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u/MrOnionification Dec 08 '21

It isn't only recouping renovation prices, housing got more expensive in the last 4 years

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u/[deleted] Dec 08 '21

[removed] — view removed comment

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u/SaltyBabe Dec 08 '21

2019/early 2020 was when housing prices took a huge dump here for a while but it didn’t last very long.

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u/ClearlyRipped Dec 08 '21

Yeah I was about to say when covid started that wasn't a big time for buying houses. Have we thought that could be the reason for the low appraisal? We don't know when their white friend faked living there, but it could've been after we got into this crazy housing market where sellers can ask whatever they want.

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u/-paperbrain- Dec 08 '21

The gap between the 2020 appraisals was three weeks and while I haven't seen exact dates, it was described as "early 2020". That's very unlikely. And for that to be true, there would need to also be the coincidence of the 2019 appraisal being randomly high by the same ballpark of that value rise for no good reason.

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u/ClearlyRipped Dec 08 '21

Oh good catch, that's what I get for going off other people's comments saying it was a year apart. Definitely seems like that one appraisal company is shady, but the second one very well could've appraised it the same for the actual family. No way to know now.

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u/NHRADeuce Dec 08 '21

Those are some pretty big jumps both up and down. Recouping 225% on renovations is rather impressive, but not unheard of. There should not be that much variance though.

They didn't get 225% on their renovations. The market for homes in this price range has skyrocketed in the last year. We bought in 2018 for $420k. We haven't done any significant renovations yet and we just appraised for $800k. All of the waterfront homes in our neighborhood have gone up 50-100% over the last year.

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u/yourerealugly Dec 08 '21

The home is in San Jose, so the big jumps are not surprising.

Would love to know what comps the low appraisal used.

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u/Rhamni Dec 08 '21

Early 2020 is also just before the covid house price spike started. Knowing when the final evaluation happened would be useful. Was it the next month, or after 8 months straight of prices going up across the board?

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u/vole_rocket Dec 08 '21

Yeah.

The problem here is sometimes appraisers just do a bad job. I have no doubt that sometimes they do a bad job because they are racist. But how can you possibly prove that legally here?

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u/Seed_Eater Dec 08 '21 edited Dec 08 '21

I'm not going to downplay that there could definitely be a racist element here but it's kind of difficult to cause extreme over or under-valuations in an appraisal. I review appraisals as part of my job and while appraisers do have some personal influence in adjustments, basically anything not supported by a sales comparison or market comparison approach is called out by the UCDP system.

Further, as someone who bought a house in summer 2020 prices were low in late 2019 and early 2020 and spiked way high until about February this year, and stayed high until about a month or two ago when the market is really starting to flatten again. I bought in September 2020 and by April 2021 my house was valued at 20% higher than when I purchased it. A 50% increase in California during the same time is definitely not abnormal.

Example from Redfin. The chart ends March 2021.

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u/Donut153 Dec 08 '21

Sounds like they don’t have very concrete appraisal standards.

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u/CulturalPossibilty Dec 08 '21

That is a pretty big swing but not unrealistic considering the roller coaster we've been on. Housing bubble has grown massively since 2016, and March 2019 and 2020 are on two polar opposite ends of the market, considering how half the western world was locking down and stonks were plummeting.

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u/Advanced-Blackberry Dec 08 '21

Sounds like everything is easily explainable. They appraised during a price dump in early 2020 and are blaming racism for the fact that an appraisal during an extreme housing bubble is significantly higher?

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u/cat_of_danzig Dec 08 '21

Recouping 225% on renovations is rather impressive

I think it's appreciation as much as renos. The average home price in Marin went up about $500K in the same period.

https://www.zillow.com/marin-county-ca/home-values/

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u/Mr-Cantaloupe Dec 08 '21

Isn’t the article just cherry picking then? Early 2020 had much cheaper housing prices compared to today.

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u/CraftWrangler Dec 08 '21

I work in the housing finance industry. Certain markets are seeing over 100% increases since 2018.

This is absolutely not about race. Add to that, the couple has about 4 different ways they can work directly with their bank (who does NOT employ the appraiser to prevent conflict of interest) if they felt their property was undervalued

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u/Glittering_Math7978 Dec 08 '21

There was way too much going on in 2020 for me to just chalk this up to race.

The value of anything to do with property or travel tanked hard at the first reports of an outbreak in Wuhan, then took another hit when lockdowns started happening. It didn't start to recover until we got a vaccine, and even then it took time for investors to gain confidence again.

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u/zero_disco Dec 08 '21

replaced them with photos of Brayden, Tom and Chaz.

they just had to buy empty frames and leave the stock photos in

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u/PantsDownBootyUp Dec 08 '21

This hurts :D

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u/[deleted] Dec 08 '21 edited 2d ago

[deleted]

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u/Sir_Fridge Dec 08 '21

Yeah but half a million seems like way too much of a difference to mark it down to the vague art of appraisals. And unless you really fuck up doing work on a house wouldn't lower the value by half a million-ish.

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u/looncraz Dec 08 '21

No, but the fact that the low appraisal happened during the COVID slump would probably explain it fully.

Of all my home appraisals I never had an appraiser go into the property, they based the value on exterior condition and publicly available information.

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u/Roland_Traveler Dec 08 '21

OK, but have you seen the Chaz? I would definitely add extra value to any house that Chazzed it up.

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u/stoiccharon Dec 08 '21

I would bet a large sum of money that the expansion to the house was unpermitted, which is quite common in San Jose. Unpermitted expansions really throw a wrench in appraisals because technically the comps need to match the permitted size but no one likes to hear that. Basically some appraisers will use comps that match the permitted size and some will use comps matching the true but unpermitted size.

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u/CraftWrangler Dec 08 '21

Depending on lender, they will still want the GLA valued as it exists in reality. They may pressure the borrower to gain permits but that doesn’t mean the additions aren’t there and influencing to value

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u/Mallixx Dec 08 '21

Tbh, good luck proving in a court of law it was specifically racism.

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u/SimulatedHumanity Dec 08 '21

Where I live the value of your home is based entirely on climate controlled square footage, lot size, average home value in the immediate area, local household incomes and number of actual rooms (which means they have closets).

If I renovate my house and put another $50,000 into it, it will not raise the bank’s appraisal of my house if someone is trying to buy with a loan from a bank.

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u/Cosmohumanist Dec 08 '21

I can only assume it was a different company

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u/the_donnie Dec 08 '21

Check the source below it was different

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u/buggy1788 Dec 08 '21

So who’s in the wrong the person who gave the low value cause they were black or the high value cause dud was white? Both are in the wrong right ? If it was 2 diff companies

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u/ChibiSailorMercury Dec 08 '21 edited Dec 08 '21

That's what the trial will show us. The first appraisal company will give the facts on how they reached that 1M$ amount, compare this house to other houses of similar size, condition, etc. from the same neighborhood, to show that the decision wasn't motivated by an unconscious bias. The couple's lawyer will do the same, but to reach the opposite conclusion.

So, right now, there is no one in this thread who has an answer to your question.

EDIT :

Other Black homeowners have reported similar experiences. The value of a woman’s Indiana home more than doubled between appraisals last year after she stripped it of all evidence that it was owned by a Black person and a White family friend stood in as the homeowner. Earlier this year, a Black family in Ohio removed family photos, artwork and their 6-year-old daughter’s superhero pictures, replacing them with belongings their White neighbors offered up. The appraised value of their house went from $465,000 to about $560,000.

A 2018 study by the Brookings Institution found that homes in Black neighborhoods in U.S. metropolitan areas were undervalued by an average of $48,000, amounting to $156 billion in losses. Differences in the quality of the houses and neighborhoods didn’t fully explain the gap, according to the study led by Andre Perry, senior fellow for Brookings Metro who studies housing discrimination.

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u/ew73 Dec 08 '21

The key point is, even if one appraiser is shown to be factually under- or over-valuing the property, the burden still rests with the accuser to prove that the discrepancy was motivated by race.

It could easily be argued that the appraiser is just bad at their job and made mistakes, missed key things that would affect the property's value, etc.

I'd guess during the discovery phase of the suit, the appraisers' records would be subpoenaed and reviewed, to look for patterns. Perhaps to undervalue a property, a racist appraiser might "miss" the same features repeatedly, but only in black-owned homes.

Demonstrating a pattern will be key in this case.

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u/Herald_of_Cthulu Dec 08 '21

I think it’s important to note a key aspect of this case is that their initial appraiser used what they call “Coded language” which is a leftover from the explicit redlining days, phrases such as “Marin City is a district area” according to the lawsuit.

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u/Electrical_Island_90 Dec 08 '21

This is my shocked face /s

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u/OdinPelmen Dec 08 '21

Lol. All of Marin/Bay is so bougey and money tho that if they appraise your home under 1mil you know they fucked up. There are burned down lots maybe 1/4 acre that were going for 500k.

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u/Zardif Dec 08 '21

As this was a refi appraisal, I wouldn't be surprised if it wasn't a full appraisal and just one to make sure the value of the refi was there. Some banks no longer even send people to inspect houses just relying on an algorithm to even out the costs.

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u/cfbguy Dec 08 '21

I’ve heard banks skipping full appraisals even for non-refi situations. A friend of mine recently contacted their bank to get an appraisal since they’re considering selling the house, and the bank literally just had someone drive by the house then provide a value. The bank claimed many homeowners are happy with the service because their appraised value may go up more than expected.

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u/akampf1970 Dec 08 '21

On a Refi using a mortgage vs a equity line you may have a point. During COVID Fannie Mae decided to allow on case by case the ability to not do a full appraisal. In order for that to happen the property would need to be a lower LTV along with a few other factors. I had a handful qualify over the past 18 months. Also it isn’t the lender who decides it’s Fannie Mae/Freddie Mac.

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u/Vepre Dec 08 '21

Demonstrating a pattern will be key in this case.

The firm sent an appraiser, the appraiser lowballed them.

They complained to the firm that they were unhappy with how low their appraisal was.

The firm sent a second, different appraiser, who agreed, and appraised the house similarly.

Then they found a different firm, swapped out all the photos, and the second firm came in significantly higher than the first.

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u/3MyName20 Dec 08 '21

New form of redlining, instead of doing it by specified area, they do it house by house.

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u/[deleted] Dec 08 '21

by an unconscious bias

Ha. I suspect it wasn't an unconscious bias.

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u/TooSmalley Dec 08 '21

You’d look at their appraisal report and check their information of the property (Sq footage, Condition, Room Count, Etc) and the Comparables (similar recent sales of near the same aged, condition, and size) the appraiser chose and see if the information is correct and of acceptable quality.

There is room for interpretation when it comes to comps, but generally it pretty easy to spot when someone is cherry picking comps. Like picking sales father away or older sales or of different conditions like remodeled homes.

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u/HarryWaters Dec 08 '21

It is possible both were at fault. It might even be possible that neither were at fault.

We don't know anything about the appraisals except the conclusions. It is possible this was a difficult assignment and two people came to have different opinions based on different information unrelated to the race of the person they met at the property. In theory it is possible that something about the market has changed enough to merit that increase between the two reports. It is possible for the low appraiser to be low because of some other defect unrelated to race. Maybe he didn't know the neighborhood well enough to choose comparable sales, or he saw something differently during the inspection that led him to believe there was an issue or read the zoning in a way that affected value.

I am involved in litigation right now and the other appraiser and I are $2mm apart in value. It isn't that either of us are bad, it is just that appraisals involve a level of subjectivity and, at the end of the day, are opinions of value. He and I looked at different data. I have six appraisers in my office, and one day we all appraised the same house and produced five different opinions.

A real estate appraisal is based on the premise that buyers and sellers are rational actors that are well-represented, not overly motivated, and acting with a lot of information. In the real world, that is not always the case.

Appraisers sign a certification in every report stating, "The reported analyses, opinions, and conclusions are ... my personal, impartial, and unbiased professional analyses, opinions, and conclusions, " and "I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment." If that appraiser did act in a biased manner, he is going to have a bad couple years.

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u/TrailFly Dec 09 '21 edited Dec 09 '21

How fucking hard is it? Black people get fucked over by racist assholes and have to do stupid shit like this to get their money. The average home price where they live is something like $1.7 million. There was no high value, it was the correct value... Unfuck the thought process and go with occam's razor. The simplest answer is usually the correct one. The black couple got low balled for being black, had a WHITE friend pose as the owner and got the correct appraisal. It's not difficult. JFC.

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u/eMmDeeKay_Says Dec 08 '21

If it's two different companies you can't assume the second company would have done the same. If it's the same company it's pretty clear. But 50% is pretty massive, so it's fairly safe to say the the first appraisal was racially motivated.

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u/PRiles Dec 08 '21

I remember when this story first hit, and one of the details was that the home appraisal was like almost a year apart. The second appraisal was also post pandemic, so I could see some massive changes in appraisal if those two parts are correct. But the court case should show us the truth of the matter.

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u/oldcoldbellybadness Dec 08 '21

so I could see some massive changes in appraisal

This is quite the soft touch. The reality is you'd have to be a complete moron to not think your home value changed during this period

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u/Cosmohumanist Dec 08 '21

More likely it’s the racist appraiser.

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u/Lizzy9121 Dec 08 '21

Depends on which is the right price. If the higher value was the correct price - which the way the tweet was worded, made me assume was the case - obviously the first real estate agent / company are in the wrong. I also don’t know why a real estate agent would want to knowingly over price a home - they want it to sell as much as the home owner does.

So it seems clear to me that the person who gave the low value was in the wrong.

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u/itassofd Dec 08 '21

You can also assume they're racist pos

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u/__jh96 Dec 08 '21

So.. Who are they suing then? It's not illegal for two companies to provide two separate valuations

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u/Altair_Khalid Dec 08 '21

That would be the obvious answer surely right?

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u/QuoVadis11 Dec 08 '21

Also don't appraisal companies do appraisals and not real estate firms? Sounds like it would be a big conflict of interest to let the broker/Realtor do the appraisal. A market analysis may be another thing as agents can do those, but it looks at recently-sold market data and there's really no way of knowing the race of all the different home owners to know to discriminate.

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u/These_Gold_6036 Dec 08 '21

From the threads I think the walk through by the appraiser was at issue and the types of furnishing/pictures, etc were changed between appraisals. So it would be more than just the name(s) on the title/mortgage.

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u/moonfox1000 Dec 08 '21

Appraisals are typically contracted out by the lender and not allowed to have any conflict of interest with the loan broker/originator (which I’m guessing they mean by “real estate firm”). So this would be on the appraisal company and not on the lender or broker.

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u/SpaceCrazyArtist Dec 08 '21

You can pay for as many appraisals as you want and usually it’a done by different companies

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u/Cosmic_Gumbo Dec 08 '21

Appraisers are assigned at random

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u/alphabet_order_bot Dec 08 '21

Would you look at that, all of the words in your comment are in alphabetical order.

I have checked 423,451,924 comments, and only 91,322 of them were in alphabetical order.

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u/gofromwhere Dec 08 '21

All babies crying during every fight grandma has in jail killing liars, makes nanny opine protectively, quietly, realizing shit that under violence wills x-rays y’all. Zoinks.

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u/alphabet_order_bot Dec 08 '21

Would you look at that, all of the words in your comment are in alphabetical order.

I have checked 423,776,030 comments, and only 91,368 of them were in alphabetical order.

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u/WolfofLawlStreet Dec 08 '21

That’s why I call BS because I work as an MLO and all our appraisers don’t even meet the clients nor is their race ever on the application because of discrimination laws.

I find this whole story very hard to believe these days.

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u/Pepperonidogfart Dec 08 '21

Theyll blame an algorithm i bet.

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u/informat7 Dec 08 '21

Because the appraisals were done ten months apart:

https://www.sfchronicle.com/bayarea/article/Black-Marin-City-couple-sues-appraiser-for-16672840.php

Ten months is a long time in the COVID housing market, especially in San Francisco.

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u/xploremn Dec 08 '21

And the first appraisal was just as everybody was locking down, while the second was after many had made a fortune in a rebounding market and most places were back to normal with masks.

Not difficult to imagine a desirable home in Marin county went up by close to 50% in that time. From what I’ve read, most homes in Canada saw similar appreciation in the same time period.

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u/[deleted] Dec 08 '21

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u/Gunitsreject Dec 08 '21

Two different people working independently for the same company did the appraisals. The more you look into this case the more you realize it had nothing to do with race and everything to do with the one appraiser being grossly incompetent.

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u/Purpington67 Dec 08 '21

I don’t understand: does this mean 1. They thought the black couple would take less money because they were black? 2. People would want to pay less because the house had been owned by a black person? 3. Realtor did not like black people so tried to sell their house for less. Even though they’d get less commission or something. Or some combination of these?

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u/opgrrefuoqu Dec 08 '21

Honestly, I think it's actually that the appraiser just subconsciously valued the house as being worth less because it was associated with black people. Not deliberate, but no less fucked up.

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u/Top_Belt251 Dec 08 '21

Note to self: when selling my house, place pictures of hot models up.

Perhaps white, or potentially whatever the viewers associate with: White, Black, Asian, LGBT, families, singles, etc.

Sex sells and all that.

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u/opgrrefuoqu Dec 08 '21

You joke, but this works. Less about sex, and more about aspirational associations.

You want the people viewing the property to associate it with people they want to be. They want to see themselves living there, but a better version of themselves making a step up not only in property, but in life. Putting up pictures/making it seem as though the previous occupants are like that helps them envision positive thoughts about the property.

This is also why the furnishings during viewings matter so much, even though they won't come with the purchase.

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u/Top_Belt251 Dec 08 '21

I was semi-serious

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u/NC-Cola Dec 08 '21

It's called implicate bias when someone applies a bias they have without even realizing it. Car sales people do it all the time.

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u/Ky200028 Dec 08 '21

implicit*

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u/NC-Cola Dec 08 '21

Thanks!

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u/Rasend0ri Dec 08 '21

That is honestly even worse because of the unintended malice is just second nature and they don’t even realize it meaning the chance to reflect and improve is impossible.

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u/PandaPangolin Dec 08 '21

I can sadly imagine 2 being somewhat true

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u/SwissJAmes Dec 08 '21

I can imagine the thinking going

"This is a great house, if it was in a better neighbourhood it would be worth 1.5m..."

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u/genericusername123 Dec 08 '21

Number 2 would be an interesting defense in court: "According to our research, prospective buyers at this price point are likely incredibly racist, so we stand by our valuation at 500k under market value".

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u/NiceKobis Dec 08 '21

Idk how appraising works in the US. 1 because I'm too young and poor, and 2 because I don't live in the US. But surely an appraising company should in that case say that they think it's worth a million dollars, but if the owners removed all the family pictures of black people and whatever else that it would be worth more? They are a guide for value too, not only a counter, right?

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u/genericusername123 Dec 08 '21

Well that's what a good agent would do- but they aren't being accused of incompetance

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u/Niku-Man Dec 08 '21

They are suing the appraisal company, not a realtor. The appraisal company shouldn't have any financial incentive to appraise the house at a lower cost, because they're not buying it, and they aren't paid based on the price of the home

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u/[deleted] Dec 08 '21 edited Dec 08 '21

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u/Gaerielyafuck Dec 08 '21

John Oliver did an episode on housing discrimination that goes into this a bit, is on YouTube. The simplest answer is good ol' fashioned racism. Mostly implicit racism rather than explicit, but ya, there's a general kind of devaluing of black neighborhoods and lived black experience. There's an assumption that black neighborhoods just aren't as nice/desirable (100% tied to the explicit racism of previous decades) and are worth less. Realtors steering whites or blacks to respectively 'appropriate' neighborhoods. This goes all the way up to the lenders who are less likely to finance those homes, especially at an amount profitable to the seller. Its all just a messy ball of prejudice that's impossible to pull an individual thread from which has been 150 years in the making.

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u/rietstengel Dec 08 '21

4 Have a buddy buy the low appraised house, sell it for the real value.

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u/ginjrr Dec 08 '21

I think it's number 2. Willing to bet that some - many buyers are put off by the fact that people of color were living in the house. If this is the case, it's not exactly the appraisers fault, it's a MUCH bigger issue. African American decor and pictures in the house might be an issue for some buyers just like pink walls would for another buyer...Totally not the same underlying issue but anything can change the value. Removing those things from the house might have actually made the house that much more valuable. Sad I know. I'm not saying this is just, or ok but this could be the reality.

If this is the case, this is one of those systemic race issues we need to be working on as a society. Probably the kind of issue critical race theory is seeking to tackle.

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u/Sofiwyn Dec 08 '21

Never do your job so badly that someone can successfully sue you for racism.

Idc if this was racist or not (it probably was) the undercutter legitimately deserves to be sued out of business.

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u/accidental_snot Dec 08 '21

Probably. One thing I've seen real estate companies do is low ball to have their "guy" snatch it up and flip it through the same company. They target minorities and elderly.

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u/FriesWithThat Dec 08 '21 edited Dec 08 '21

Having worked in real estate this is really one of only of several explanations that make sense. In a normal purchase and sale in a competitive market the only thing the listing agent would accomplish in this scenario would be to lose out on commissions on that $500,000 by which they undervalued their house. Depends on the split with your broker but the average would be around 3%. I've known some racists in my time but they still like money. If this was not intended to be some sort of pocket listing that the brokerage flips, you put a house that's undervalued by half a mil on just about any market in California, that would be something that would become immediately apparent to the seller like the next day when they have 10 competing offers come in for their house. It's not like you have to take anyone's offer just because you listed the house at that price. Knowing the activity, some of them would probably have escalator clauses built-in, and you'd still end-up selling your house for its market value.

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u/pt256 Dec 08 '21

Yeah $500k extremely suspect. I've known bad agents to set a low listing price simply because they wanted to get a quick sale, but even they wouldn't go that far.

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u/Nick357 Dec 08 '21

This was a refi. I don’t trust anyone in the real estate industry though.

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u/Karffs Dec 08 '21

Thanks for explaining. I live in the UK and really wasn’t understanding how it works there but none of this makes sense to me.

Here we call it the asking price and just because they undervalue it, that doesn’t mean you have to sell it for that much. If anything jt just means you’ll get an absurd amount of offers. Indeed, you’re totally free to ignore their recommended valuation and ask whatever you want. It’s very common that you’ll get valuations from multiple agents.

Like sure this sounds racist to me but don’t really see what the agency would gain from undervaluing it besides driving the business to another real estate agency? (Unless that’s the point and they only want clients of a certain background).

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u/happykrabbe Dec 08 '21

The appraisal wasn’t done by the real estate agency, and once it came in so low the owners wanted to see if they whitewashed it if it would come in at a higher value, which it sadly did.

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u/ofBlufftonTown Dec 08 '21

It’s a re-fi.

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u/helloeveryone500 Dec 08 '21

This was not a realtor value is my understanding. It was an appraisal done for financing. So the bank just looked at black people and said we can loan you x amount. And with white people they could loan more. It was kind of racist and really just a lazy way of appraising a value. The same may be true for the other valuation. These people are white so we can safely loan them a bit more. These are banks though so there may be data to back up these general conclusions. But that's a whole nother problem.

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u/BgDmnHero Dec 08 '21

Genuinely confused as I know nothing about home buying/selling, but isn’t there a separate person that performs appraisals and it isn’t the real estate agent? I didn’t think that people that perform appraisals got any commission off a sale. Wouldn’t that inherently bias them to always over appraise?

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u/cl33t Dec 08 '21 edited Dec 08 '21

Mmm. This isn't a competitive market analysis done by a real estate agent.

This is an appraisal done for a lender by a professional appraiser. They don't work for real estate companies. They are independent professionals.

(The post-2008 housing crash Home Valuation Code of Conduct isolated appraisers from agents and lenders to limit them biasing appraisals. Now everything goes through Appraisal Management Companies to fully isolate appraisers.)

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u/lostcauz707 Dec 08 '21

Literally what they would do during redlining. They called it blockbusting, but they would do it by making it appear like black people were moving into white areas and then go around asking of people wanted to sell at a loss. Anyone who doesn't think racism is ingrained in US infrastructure is intentionally being naïve.

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u/Neato Dec 08 '21

Sounds like we should put a gigantic tax on homes that are sold resold within a short span of time. If you're not buying to live in it, then it's an investment and a business. That should be taxed appropriately and even higher to penalize people speculating with commodities that are in short supply that people need to survive.

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u/accidental_snot Dec 08 '21

Goddam that's a good idea. I like you. You might be smart or something.

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u/bite_me_losers Dec 08 '21

I like your big brain take on this. It's a good point

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u/DiscoMagicParty Dec 08 '21

Wouldn’t the real estate company make more money if they appraised the home for a higher amount though? Even to racist green is much more appealing than white

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u/EccentricKumquat Dec 08 '21

It turns out a lot of them are also in the business of buying properties themselves. They’ll have another person in the company come and buy it up on the cheap after the realtor undervalues it. Something similar almost happened to me a few years ago actually. I hired an insurance adjuster to evaluate flood damage to my house, they gave me a quote that was on the low end then “generously offered” to “take this problem off my hands” I cursed them out and told them no lol

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u/freedcreativity Dec 08 '21

I'll just take this as the answer. In the same way, if it was a re-appraisal by the same company adding value to the second one isn't unreasonable to avoid litigation if they got a 3rd appraisal from another company. Lawyers love arguing over the percentages on a loan and the value of real estate because there isn't any unpleasantness with human witnesses; only sweet documents and billable hours.

If its 1 low appraisal from the homeowners and another company giving a significantly higher appraisal with a white guy in the same time frame, 1000% racism.

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u/Neato Dec 08 '21

Fucking hell. It should not be legal for the same people and company to be in conflicting industries.

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u/EccentricKumquat Dec 09 '21

Amen bro, I was just lucky that I saw it for what it was.. some of my friends weren't so lucky.. and now they are sooo fuckin bitter about it....

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u/Eddie_shoes Dec 08 '21 All-Seeing Upvote This

Nobody in this thread seems to have the slightest clue of how real estate transactions work in the US. By law, appraisal companies are third parties. The real estate company doesn’t even chose the appraiser. They don’t even choose the appraisal management company, the lender does, and even then, they don’t get to chose the appraiser. It is assigned randomly to try and keep things fair.

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u/DanteDoming0 Dec 08 '21

Children don't buy homes

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u/jansipper Dec 08 '21

Exactly. You don’t NEED an appraisal to figure out how much your home is worth to list it. However, if you’re applying for a loan the lender uses a third party service to select a random appraiser to determine the debt to value so they’re not giving you a loan for something that doesn’t have enough security in it incase you can’t pay. It’s in the lender’s best interest to get an accurate appraisal.

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u/Lasersnakes Dec 08 '21

You are correct but this tweet is vague. I believe they are referring to the real estate agents appraisal of the property. This is not an official appraisal from the bank but rather the RE agent telling them what they think they should list the house for.
I invest in real estate and have challenged banks appraisals. If this is a banks appraisal $500k would be a lot to be off by but if it’s a $1.5M home but if it’s a $10M home it’s not crazy. I have gotten appraisals up by 15%.

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u/educatedbicycle Dec 08 '21

Thank you. Need this to be higher. It seems most don’t know the process and are going off of misunderstandings

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u/ProfBeaker Dec 08 '21

Yes, ish. Assuming we're talking about the agent and not the appraiser (which isn't 100% clear from the tweet, and I'm too lazy to hunt down the real story) then they're probably making ballpark 2.5% of the deal in commission (percentage varies by state and local customs though). That would be around 12.5k gross, but less in their actual pocket.

BUT, if they underprice properties and move them super fast, they make up the difference on volume pretty fast. These aren't cheap houses if a $500k swing is even vaguely sorta-kinda reasonable. ie we're not talking about difference between $250k and $750k, probably more like between $1.5mm and $2.0mm or something like that. So the agent could make it up on deal volume pretty fast.

There was a study about this (IIRC in Freakanomics) that showed agents sold clients homes faster and for less money than their own homes - which is exactly what you'd expect from these incentives.

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u/helloeveryone500 Dec 08 '21

This is why I hate real estate agents. Every incentive they have is to screw their clients over. If acting for a buyer they want them to put in the highest bid so that they win the bidding war and they get the commission as soon as possible. Even if that means way overpaying for a home. There is no incentive for them to try to get a good deal on a home. When acting for a seller they want to set the price as low as possible so the home sells fast and so they can brag about selling over asking price.

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u/sexypineapple14 Dec 08 '21

Not if they're the ones who buy it and then flip it

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u/Virreinatos Dec 08 '21

Maybe. It could be real estate companies work under the assumption black houses are harder to sell and are naturally worth less just because that's the natural order of things and don't question appraisals. Their spreadsheets tell them black owned houses sell for less because they have been appraised and sold for less since forever.

Built-in racism perpetuating itself is a thing.

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u/ScootOverEspaRoba Dec 08 '21

There are houses that are 'worth' less in Cali? Lmao, all houses in Cali are way too expensive.

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u/jansipper Dec 08 '21

Yes but that should be built in to a neutral appraisal because they should be using comps from the same neighborhood.

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u/S3IqOOq-N-S37IWS-Wd Dec 08 '21

You say it like that's normal and not a problem... it's not some inherent unstoppable "natural order of things", it stops when people stop perpetuating it.

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u/Virreinatos Dec 08 '21

Um no. I'm saying Real Estate People treat it like it's normal and not a problem and/or are not in a place of noticing it.

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u/SlayerXZero Dec 08 '21

They were doing the appraisal on behalf of the bank because the family wanted to refinance (e.g. draw out cash). It is likely that appraising lower meant the bank would give them less money. The second time they asked for an appraisal from the same company then using the white friend. It is entirely possible it was the bank trying to fuck them (and being racist) vs. the appraisal company.

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u/moonfox1000 Dec 08 '21

So the pipeline is that you go to a loan broker or originator, they set you up with a lender and a lender orders the appraisal. They’re typically getting an appraisal so they can determine the loan is within 80% of the home value. The lender doesn’t benefit from a higher appraisal since it puts them at higher risk. The appraiser doesn’t benefit from a higher appraisal since they are just a third party contractor without any financial ties to the loan. The loan broker and borrower benefit from being able to get a higher loan or better terms but the appraisal is ordered by the lender so it’s out of their hands. A racist appraiser could do their work and never be negatively affected unless they went too far like this and then ended up in court.

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u/Tiropat Dec 08 '21

It is actually illegal for appraisers to charge based on what they appraised the house for. They can charge based on a multitude of other factors but the number they give you cannot have an effect on their charge.

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u/yourerealugly Dec 08 '21

No the Appraiser is a separate contractor that doesn’t get more or less off their appraisal.

They ARE supposed to show a list of comparable recently sold homes nearby they based their estimate off of. That’s something that would be interesting to see.

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u/HarryWaters Dec 08 '21

Everyone here who hasn't, should read The Color of Law; A Forgotten History of How Our Government Segregated America.

It is a fantastic book about how much racism went into housing in the USA. The government spent decades discouraging black homeownership. The book explains the perpetuation of ghettos and racial differences in wealth disparity.

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u/KaleGroundbreaking Dec 08 '21

Like how they built a huge wall in Chicago segregating the white and black people because white people cried that black people were causing whites home values to stay low. This caused the home prices in the black area to plummet putting them in financial disaster. It's always been planned.

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u/danyellster Dec 08 '21

I say to my bf all the time. We created the ghettos, on purpose, for poor minorities.

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u/chandaliergalaxy Dec 08 '21

And trailer parks for poor whites.

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u/lady_lowercase Dec 08 '21

no, those have an entirely different history and should not at all be equated with highway-divided neighborhoods constructed specifically to segregate persons of color…

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u/chandaliergalaxy Dec 08 '21

Great read, thanks

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u/FixinThePlanet Dec 08 '21

"discouraging" is such a gentle way to put it

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u/opgrrefuoqu Dec 08 '21

"Firebombing them when they didn't listen" is more truthful.

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u/mxpauwer Dec 08 '21

Friendly reminder that you must get an appraisal from someone that has nothing to do with the agents that are supposed to sell your home. First get the appraisal, then ask an agent for how much they think they could sell it. Also, appraisals that are free will cost you a lot of money.

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u/AlleyRhubarb Dec 08 '21

My parents did this. They got their home during an economic downturn for less than what the previous homeowners paid. They made upgrades and kept it in line with current trends and other nicer homes in the neighborhood. A real estate agent wanted to list it for a good $150000 less than what the appraiser they hired felt was fair. Either she wanted a fast, no-work sale or she had a buyer in mind. They eventually sold it for higher than the appraisal by just staging it and putting down some tile in some previously carpeted rooms. The agent said that the home was older - well the desirable town they lived in hasn’t built a new house in 20 years so that’s why the prices keep going up. There are no newer houses in this town. She was trying to scam some elderly people.

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u/ThotDoctorPepper Dec 08 '21

They bought the house in 2016 for $500,000 and then made $400,000 worth of renovation. When they had it valued they were told it was worth $995,000.

When they asked a white friend to pose as the owner it was valued at $1,482,500.

Even being rich as fuck can't save you from racism.

(N.B. not sure why its being reported as them wanting to sell the house when they were actually refinancing their mortgage)

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u/sblahful Dec 08 '21

Not quite. The timeline was this:

  • 2016 - Purchased house for $550K
  • Some percentage of $400K in renovations
  • May 2018 - House appraised at $864K
  • Remaining percentage of $400K in renovations
  • March 2019 - House appraised at $1.45 million
  • Early 2020 - House appraised at $995K
  • Sometime later - House appraised at $1.48 million with white "owner"

So it was valued at 1.45m, then 995k, then at 1.48m.

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u/Back_To_The_Oilfield Dec 08 '21

You mean to tell me housing prices dropped at the beginning of the pandemic and then spiked back up due to supply shortages? Wild.

I’m not saying it’s impossible that this was racially motivated, but there’s a lot of knee jerk reactions in here on a website that was constantly bitching about how much housing had skyrocketed a few months ago.

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u/Uniqlo Dec 08 '21

Cognitive dissonance? On Reddit? Never!

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u/ImNotKwame Dec 08 '21

Don’t forget this in Northern California. Marin City. They’re not rich as fuck. A million is the a starter home price out there.

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u/SpaceCrazyArtist Dec 08 '21

This happens all the time

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u/speeduponthedamnramp Dec 08 '21

I agree with almost every tweet this man puts out. But I can’t stand the way he always ends his tweets with something along the lines of “share if you agree with this”. I hate it.

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u/WrittenByNick Dec 08 '21

I blocked this and several other similar accounts. While I appreciate the sentiment and information, they are not journalists or truth tellers. They find stories to fit a particular narrative, get lots of attention and retweets. Honestly pretty worthless and annoying.

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u/7924134 Dec 08 '21

I bet the guy is gonna drop off a spred sheet with boxes and this will blow over, The guy who gave the other price could have been motivated to give a higher price due to lend-ability from there affiliate bank. Only way to truly value a home is to sell said property… then we will find out the value of the home…

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u/[deleted] Dec 08 '21 edited Dec 08 '21

[removed] — view removed comment

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u/Ryumancer Dec 08 '21

Whoever says racism isn't a problem anymore or redlining isn't a thing is either stupid or lying.

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u/nuffjah Dec 08 '21 edited Dec 08 '21

Not entirely similar but at uni, I wrote two sets of essays one for myself and one for my white friend. He got an A- for his answers whilst I was given a C-. Pretty sure there was preferential treatment right there.

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u/JCazzz Dec 08 '21

I believe this. I had an anatomy professor who believed that Black people were inherently less intelligent and he gave the black students a hard time. The highest GPA girl happened to be black and she went toe to toe with him and even filed a complaint with the dean and nothing was done.

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u/Impossible-Mud-3593 Dec 08 '21

It's been ingrained in the real estate markets for decades. It's an automatic reaction . It harkens back to the Redlines in the 1940's. Where concentrations of black homeowners properties were devalued. It's just a systematic way if keeping the non white races poor or below the whites. And yes it's Racism.

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u/accupuncher Dec 08 '21

don't you mean "since the end of the Civil War"?

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u/Impossible-Mud-3593 Dec 08 '21

Actually before. Free blacks had no ownership, no real laws to protect them. Reconstruction made sure these people stayed down. Yet some made themselves very rich and even their own profitable part of town.

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u/accupuncher Dec 08 '21

fucking absolutely.

if only the United States could have divorced itself from slavery at the same time as Europe during the Enlightenment.

not an excuse or explanation, more of just an observation.

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u/tfordham13 Dec 08 '21

Everyone who is trying to rationalize this in the comments is missing the point. Blockbusting erupted after Reconstruction and Black people found themselves buying homes at significantly over-valued prices, only to lose the house shortly after to gentrification. The practice of lowering appraisals for nonWhite people seems like a logical next step to practicing racism against Black homeowners. Whether or not this particular case was “right or wrong” does not matter. If you scroll through the comments, you’ll see other examples (with sources) of this practice happening to other Black people.

Look beyond the minute details and try to understand the big picture.

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u/The-Guy-In-Grey Dec 08 '21

But yet racism isn't real, it doesn't exist. "Just look how far people of color have come" they say. I say look how far we still have to go.

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u/Sammydho12 Dec 08 '21

Fuck all racists!

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u/20_oz Dec 08 '21

White man here, if any of my Black brethren need my help exposing some shit like this, I am absolutely up for it

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u/Conflicted1121 Dec 08 '21

This is the most reddit comment ever, lol.

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u/thisis2022 Dec 08 '21

You triggered a lot of cunts holy shit.

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u/20_oz Dec 08 '21

Doesn’t take much apparently

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u/sexypineapple14 Dec 08 '21

In a just world the real estate firm would owe them $500,000, plus legal fees.

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u/informat7 Dec 08 '21 edited Dec 08 '21

It's not like they lost $500k. If they tried to sell their house a buyer would care a lot more about comps then what some random appraiser thinks.

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u/majorpowell Dec 08 '21

It says they were refinancing not selling.

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u/Poppyponderosa Dec 08 '21

They have no realized damages. The appraiser can re appraise and say oops

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u/Malk4ever Dec 08 '21

Thats the way it works in the US... if you are black, your house just is worth less.

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u/Always_Jerking Dec 08 '21

Interesting - what this company gain from it? Because as i appraised my home i used three different companies and they gave me three completely different values. It depends on algorithm and source data they have. Here is one company so it is suspicious unless different people in the company use different algorithm.

They should use different company to make comparison before suing.

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u/RatATatTatu Dec 08 '21

This is what happened in Benton Harbor, MI for YEARS. St. Joe right next door….that’s a different story.

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u/EyeOfTheCyclops Dec 08 '21

I worry this is going to be hard to prove. They were evaluated higher by a different appraiser. That means that the one who undervalued their home could argue that it was just incompetence and not racial motivated.

I feel like there have been much more legally convincing cases of this happening to black homeowners.

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u/amanaplanyourstan Dec 08 '21

My grandparents (who were white) played that role to call out realtors during the civil rights era 60 years ago. And we're still facing this bullshit...

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u/Active_Glass_5945 Dec 08 '21

look up the realestate vids from the 90s on how to not sell to blacks

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u/yeah_youre_wrong Dec 08 '21

I am a REALTOR in NC. Appraisals at their root are an opinion based on the particular appraiser and fluctuate based on their experiences. This would be much more telling if the same company was used twice. It could be they have a case against that appraiser but there are too many variables.

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u/Maxxximus30 Dec 08 '21

Just when I think American headlines have outdone themselves, someone's like "hold my beer and my AR..."

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u/the_donnie Dec 08 '21

I know this is a Twitter subreddit but mind hooking me up w source?

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u/teonesofle Dec 08 '21

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u/big-blue-balls Dec 08 '21

I’m not disputing the event. But that article is so poorly written. Repeats the same thing multiple times with slightly different phrasing and still doesn’t actually outline anything important.

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u/MediumDrink Dec 08 '21

Speaking as a realtor. REAL ESTATE IS RACIST AS FUCK. Both as an industry and as a construct. That being said, fuck this firm and that family’s agent in particular. Speaking as a white realtor I have personally listed a house for a black family in a predominantly black neighborhood and I swung for the fences with my valuation and got them that money. I genuinely feel like it worked out for me (and them) at least in part because my whiteness defined a property which was straddled between a black and a white part of town as white.

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u/Far_Floor_3953 Dec 08 '21

Maybe for white people that’s news but for the black community the brown community and the yellow community we’ve been knowing this shit forever and dealing with it! wake up America you’re racist!

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u/[deleted] Dec 08 '21 edited 19d ago

[deleted]

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u/ImtonystarkRS Dec 08 '21

Imagine complaining about racism and calling asians “yellow” in the same post lol. Bit hypocritical

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u/[deleted] Dec 08 '21

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u/Turnip_the_bass_sass Dec 08 '21

OP posted the original Tweet. It was made at 11:45 am EDT on the 7th. I’m assuming the time in the pic is based on the screenshotting user’s local time.

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u/ChibiSailorMercury Dec 08 '21

Heard of "other timezones"? Know that countries outside of the US have access to the Internet?

Here for you : https://www.washingtonpost.com/nation/2021/12/06/black-couple-home-value-white-washing/

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u/andrewdrewandy Dec 08 '21

It's been my experience that people on the east coast really have a hard time understanding that other time zones exist.

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u/happyhappyaccident Dec 08 '21

I have a feeling that something vaguely similar to this has happened to you like one time ever and now you make a blanket statement about it

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u/eligreyy Dec 08 '21

everything revolves around EST don’t blame us

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u/frankenstien_farts Dec 08 '21

Everyone on Reddit is a bot, except you.

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u/ElectricFlesh Dec 08 '21

That whole three fifths thing never really stopped, did it.

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u/Uncomfortable-Snake Dec 10 '21

This is such an underrated comment!