NEW YORK (AP) — How much can it pay to have family photos removed from your home or other items that indicate your race?
If you’re a black person trying to figure out how much your home is worth, one family points out it could be hundreds of thousands of dollars.
A couple in Baltimore decided to sue an appraiser and mortgage lender because their home was appraised far below its value because they were black, making it difficult for them to refinance their mortgage.
The couple say a separate appraisal, done after “whitewashing” the place by removing family photos and asking a white person to represent them, made the house worth $278,000 more.
Both “were shocked at the appraisal and recognized that the low appraisal was due to racial discrimination,” according to the lawsuit filed earlier this week in US District Court in Maryland.
Representatives for the lender charged in the case, loanDepot, declined to comment on the allegations.
But in a statement, the publicly traded company said it categorically rejects bias.
“Although appraisals are carried out independently by specialized firms, everyone involved in housing financing must work to find ways to help eradicate prejudice,” he said.
The appraisal company in the case, 20/20 Valuations, was not immediately available for comment on the matter. The names of the company’s lawyers and the private appraiser mentioned in the lawsuit still did not appear in the court documents.
The situation started last year, when two professors at Johns Hopkins University, Nathan Connolly and Shani Mott, wanted to do the same thing millions of others are doing across the country.
They wanted to take advantage of low interest rates and refinance their mortgage and home loan as collateral.
The couple had bought their four-bedroom home in 2017 for $450,000 and had made several improvements to it.
Among other things, they invested in a tankless water heater and recessed lighting that the family’s lawyers say increased the value of the house.
That would add to the general rise in home prices in the area and across the country between 2017 and 2021.
In mid-2021, the couple applied for a loan from LoanDepot, which initially approved them with an interest rate of 2.25%, pending an appraisal to ensure that the property was worth enough to cover the amount in the event of a default. .
A loan officer at loanDepot told the family that a “pretty conservative” estimate was $550,000, according to the lawsuit.
But the appraiser at 20/20 Valuations, hired by loanDepot, put the house at just $472,000, according to the lawsuit.
Due to this situation, loanDepot called to advise that it would not grant the credit, according to the lawsuit.
The lawsuit alleges that in the investigation to compare the price of other homes to the plaintiffs’, the appraiser ignored surrounding sales in majority-white areas, which were similar to the couple’s but commanded higher prices. .
Rather, the appraiser considered homes that were priced low and others in areas with more residents of color.
Later that year, the couple learned that the government had appraised their home at $662,000, and they tried again to apply for another loan.
This time they did an experiment where they swapped their family photos with borrowed photos from white friends and colleagues.
They even brought in new artwork, including a classic “white model” print to adorn the wall. And they made sure they weren’t home during the appraisal. A white colleague was on site to greet the appraiser.
After that, the house was appraised at $750,000, or 59% more than the appraisal less than seven months earlier.
“It shocks a lot of people that a house should be valued objectively, but when the appraiser does his calculation believing that it belongs to black people, he assigns a value to it, and suddenly that value is 50% higher when the appraiser believes that it belongs to black people. white,” said John Relman of the Relman Colfax law firm that represents the plaintiffs.