Federal Mortgage: Freddie Mac Research Explores the Causes of the Valuation Gap for Homeowners in Minority Neighborhoods
“A valuation below the contract selling price may allow a buyer to renegotiate with a seller, but it could also mean that families might miss out on all the benefits of homeownership or be unable to secure the funding needed to reach the American. Dream in the first place. This is a persistent problem that disproportionately affects hundreds of thousands of black and Latino applicants, ”said
- The identified assessment gaps are not caused by only a small fraction of assessors – a large portion of assessors who completed assessments in minority and non-minority areas generated statistically significant differences.
- Black and Latino lot properties receive appraisal values below the contract price more often than White lots – 12.5% of Black lot properties receive appraisal values below the contract price, up from 7 , 4% for those of the White lots, which is a difference of 5.2%.
- As the concentration of Black or Latino individuals in a census tract increases, the valuation gap increases. For example, as the population of Latino individuals increases, the property valuation gap in Latin American regions increases from 7.7% to 9.4%.
- Differences in comparable selling distances, comparable reconciliations, differences in comparable selling prices and possible systematic overpayments for properties by minorities can only explain a small part of the valuation differences observed for properties. minority plots.
An analysis was conducted on the valuations for the purchase of a single family single unit home. Numerous robustness checks from different perspectives were carried out as part of the analysis, including by type of assessment, type of occupancy, condition of property, housing trend indicated in the assessment report and by level of ‘urbanization. In addition, an analysis was carried out on the 30 main metropolitan statistical regions. The trends observed on the basis of aggregated national data mostly persist; thus, valuation gaps seem pervasive.
“Equity in housing is a crucial issue and a
The company is a lead partner of the Appraisal Institute’s Appraiser Diversity Initiative, which is committed to creating a more diverse next generation of assessors and is a member of the REACh Project Assessment Working Group. The Comptroller of the Currency REACh initiative is dedicated to financial inclusion through better access to capital.
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