102.01: Objective and Unbiased Appraisals

A number of laws -- federal, state, and local -- prohibit discrimination in the appraisal of housing.  We believe professional appraisers fully understand that discriminatory valuation and appraisal reporting practices are not only illegal, but also unethical.  Unintentional discrimination, however, can occur as the result of what an appraiser states -- or fails to state -- in his or her appraisal report.  A lender must make sure that the appraisers it uses describe the property and the neighborhood in factual, unbiased, and specific terms.  The lender and the appraiser must assure that the integrity of the loan decision is not influenced by subjective, racial, or stereotypical terms, phrases, or comments in the appraisal report.  An appraiser must not use subjective phrases or comments in the appraisal report.  Examples of unacceptable terminology include "pride of ownership," "no pride of ownership," "lack of pride of ownership," "poor neighborhood," "good neighborhood," "crime-ridden area," "desirable neighborhood or location," and "undesirable neighborhood or location." Other subjective terminology that can result in erroneous conclusions being reached is equally unacceptable.

Discrimination can also result when an appraiser makes unsupported assumptions or interjects personal opinion or perceptions about factors in the valuation process that may or may not affect the use and value of a property.  We require the appraiser to consider all factors that have an effect on value and to be objective and unbiased in his or her development of the opinion of market value in the appraisal report.  The appraiser and the lender must not make unsupported assumptions or interject personal opinions or perceptions about any factors, whether or not the factors affect the use and value of the property.  We specifically prohibit an appraiser from basing (either partially or completely) his or her analysis and/or opinion of market value on the race, color, religion, sex, handicap, familial status, or national origin, of either the prospective owners or occupants of the property being appraised or the present owners or occupants of the properties in the vicinity of that property.

Our appraisal report forms for one- to four-family properties are designed to provide for an objective and unbiased description and analysis of the neighborhood, site, and improvements.  Factors that influence the value of the properties in the neighborhood must be identified and analyzed in the valuation process and described in the appraisal report.  Failure to address and note adverse factors or conditions that affect value or marketability with respect to the neighborhood, site, or improvements is an unacceptable appraisal practice.  We specifically require the appraiser to certify that he or she has taken into consideration in the valuation process the factors that have an effect on value and has not knowingly withheld any significant information from the appraisal report.  We also require the appraiser to certify that he or she has no present or prospective personal interest or bias with respect to the participants in the transaction and that the analysis and/or the opinion of market value in the appraisal report was not based (either partially or completely) on the race, color, religion, sex, handicap, familial status, or national origin of either the prospective owners or occupants of the subject property or the present owners or occupants of properties in the vicinity of the subject property.

We require the appraiser's comments to be stated in specific, factual terms that are supported by the information included in the appraisal report.  Including an unsupported descriptive comment or drawing an unsupported conclusion from subjective observations is an unacceptable appraisal practice that may have a discriminatory effect.  The appraiser's comments that address an unfavorable condition -- such as the existence of an adverse environmental or economic factor -- must discuss how the condition affects the value and/or marketability of the property being appraised and explain how the condition was taken into consideration in the valuation process.  In such cases, we expect the appraiser's analysis to reflect and include comparable sales that are similarly affected, whenever possible.  For example, if a property is located in an urban neighborhood that has vacant or boarded-up properties that affect the value and/or marketability of properties in the neighborhood, the appraiser needs to address these conditions in his or her analysis and appraisal report, and to use comparables sales from the same neighborhood (whenever possible) to assure that any effect of the vacant or boarded-up properties is taken into consideration in the development of the opinion of market value for the subject property.  The appraiser would also need to address the reasons for the vacancies or boarded-up properties in factual terms (by providing data related to such things as demand/supply, foreclosure rates, tax sales, etc.) and discuss how this factor affects the market value and marketability of the property being appraised and other properties in the neighborhood.