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 a rich set of controls and individual appraiser fixed effects, we observe lower appraised values (relative to benchmark valuation estimates) for Black-owned homes. Hispanic- and Asian-owned homes are also underappraised, but to a lesser extent. We find no evidence that minority valuation discounts lessen when the homeowner and appraiser share the same race, suggesting that implicit bias is not solely attributable to White appraisers. We also show that minority valuation discounts are not driven by a small subset of appraisers; rather, they are widespread.