What is "appraisal bias"?

Appraisal bias refers to the phenomenon where the appraised value of a property is influenced by factors unrelated to the property’s actual market value, often resulting in systematic undervaluation of homes in marginalized communities. This type of bias can stem from various prejudices that appraisers may hold, leading to disparities in property valuations based on the neighborhood’s demographic composition rather than the home’s features, condition, or comparable sales data.

When homes in marginalized communities are appraised lower than those in more affluent areas, it perpetuates economic inequality, reduces access to capital for homeowners, and hinders community investment. Understanding appraisal bias is crucial for addressing real estate disparities and ensuring fair treatment across all communities.