Do Appraiser and Borrower Race Affect Mortgage Collateral Valuation?

Abstract

We examine racial bias in property appraisals using a national sample of refinanced mortgages from 2000 to 2007. Our data allow us to observe the race of the appraiser and homeowner in a setting where the appraiser's valuation conveys critical information to the lender. After conditioning on hard and soft information, we observe systematically lower appraised values (relative to adjusted automated valuation model estimates) for minority homeowners. We find no evidence that minority valuation discounts lessen when the homeowner and appraiser share the same race, suggesting implicit bias is not driven by White appraisers alone.

Keywords: Valuation, Appraisal, Discrimination, Mortgage Refinancing

JEL Classification: G21, G28, J15, L85, R20, R21