Appraisal Industry Rulemaker Reaches Deal To End Discrimination Probe

The Appraisal Foundation — the nonprofit that writes the rules for appraisers across the country — has reached an agreement with the U.S. Department of Housing and Urban Development to resolve an investigation into alleged discriminatory barriers keeping Black people and other people of color out of the industry. 

In the settlement, the foundation denied that its qualifications to become an appraiser created a disparity that would qualify as a violation of the Fair Housing Act, but it agreed to enter into a conciliation agreement in order to conclude the investigation. 

The settlement, announced Thursday by HUD, still has to be certified by the director of the Federal Office of Special Investigations or a designee from the agency, which has been investigating the discrimination allegation since December 2021. 

The crux of the complaint is that appraisal certification has until recently required trainees to identify a mentor willing to take them on for more than 1,000 hours of training to get the most basic industry title.

Appraisers across the industry told Bisnow, in an investigation published last month, that the mentorship requirement was a major reason why the vast majority of the industry are white men and the median age of a professional is 60 years old.

“There really is no incentive for an appraiser to become a mentor,” Carole Henrysen, a Philadelphia-based owner of Zen Appraiser, told Bisnow last month. “It's a mindset thing. A lot of appraisers think, ‘Why would I train my competition?’”

There are limited options for young people who don’t already know an appraiser to find one, gatekeeping the industry by putting the onus on the trainee to find someone willing to advise them. The Interagency Task Force on Property Appraisal and Valuation Equity identified the requirement “as a significant barrier to entry for underrepresented and disadvantaged groups,” according to the press release.

In an industry that is 94.7% white and only 0.6% Black, according to Bureau of Labor Statistics data cited by HUD — the least racially diverse of 800 occupations surveyed — the lack of a diverse field of mentors has kept minorities from breaking into the industry. 

“Today’s historic agreement will help build a class of appraisers based on what they know instead of who they know,” Adrianne Todman, HUD’s acting secretary, said in a statement. “This settlement will help bring us one step closer to rooting out discrimination in housing and opening doors to opportunity for all.”

Much of the terms of the agreement center around the Practical Applications of Real Estate Appraisal program. The 18- to 24-month online course was launched by the foundation in March 2023, after HUD's investigation was launched. PAREA virtually connects new entrants with a mentor, which HUD and the foundation said will help diversify the industry's ranks. 

The 11-page agreement includes a range of commitments from the foundation and requires the nonprofit to provide annual reports to HUD for the next three years, after which the agreement ends. Among the terms, the foundation said it will:

• Establish a scholarship fund administered by a third party and funded with at least $1.2M over the next three years to shepherd trainees through the PAREA coursework, which starts at $3,995.
• Market PAREA to and solicit applications from diverse communities.
• Lobby the states that have not adopted PAREA to do so.
• Continue and add to its outreach at Historically Black Colleges and Universities and other educational programs that serve minority groups.
• Add the “Equal Housing Opportunity” logo to its website and add content about the foundation's commitment to impartiality and race-blind valuations. 
• Create an advisory Council to Advance Residential Equity and adjust its training materials to further prioritize clamping down on bias. 

The initiatives are coming as appraisers’ role in the market takes center stage, with frozen transaction markets and limited available comparable sales putting more pricing power in the hands of appraisers. 

The foundation has also faced allegations that it has leveraged its rulemaking power to generate revenue through minor adjustments to rules that require every appraiser pay to take a course to maintain their certification. 

“We are pleased to have reached this conciliation agreement,” The Appraisal Foundation President Kelly Davids said in a statement. “We appreciate HUD’s recognition of our proactive efforts to lead the appraisal profession to welcome a new, diverse generation of appraisers and their support of our forthcoming scholarship program to aid new entrants to the field.”

The foundation has already implemented many of the solutions outlined in the agreement and has committed to continuing to support or expand the initiatives.  

“Welcoming a diverse new generation of appraisers to this incredible profession has been a cornerstone of The Appraisal Foundation’s work over the last four years, and it is a key goal in our strategic plan for this decade,” Davids told Bisnow in a statement last month.