Bill moves forward that would ban discrimination in home appraisals
A Senate panel on Thursday introduced a bill that would prevent real estate appraisers from reducing the appraised value of a home because of the race of the owner or buyer, and create stiff penalties for those who breach warranties.
Supporters say the bill, sponsored by Sen. Nellie Pou (D-Passaic), is an attempt to bridge the gaps between racial wealth and New Jersey homeownership. A report released last month by the New Jersey Institute for Social Justice found that homeownership rates among black New Jersey residents are just over half those of white residents, from 38.4% to 75.9%.
“Discriminatory home valuations will continue to widen this gap and rob black and brown New Jerseyans of intergenerational wealth through homeownership without strict legislation,” said Renee Koubiadis, director of the anti-poverty program at New Jersey Citizen Action, to Senate and Urban Affairs legislators. Committee.
Black homeowners nationwide said they received higher appraisals for their properties when they didn’t let the evaluators know their race.
The measure would specifically prohibit appraisers from artificially lowering a home’s valuation based on the race of the owner, buyer, occupier or their agents. It would also be prohibited to deflate an assessment on the basis of gender, national origin, and other classes protected by state discrimination law.
“We know that rating discrimination is happening because we’ve seen a discrepancy between ratings based on race,” said Sofia Rosa, housing access organizer at the Latino Action Network Foundation. “All New Jersey residents should be able to benefit equally from home ownership, which is one of the main drivers of wealth in this country.”
An appraiser found guilty of violating the ban would have their appraiser license suspended, be forced to pay a fine to recover the costs of the appraisal, and face a separate civil penalty paid to the state. The suspension would be lifted after the assessor paid a fine and completed a mandatory anti-bias training course.
The legislation would also require the Department of Community Affairs to collect demographic data when it receives a complaint alleging discriminatory assessment and report that information to the Legislative Assembly by July 1, 2024.
Since mortgage lenders rarely offer loans above a home’s appraisal, a low appraisal can cost a home seller thousands of dollars or more.
If a buyer and seller agree on a price higher than the estimated price, the buyer must either find the difference or both parties must agree on a lower price.
Junea Williams-Edmund, a Newark-based lawyer, told the committee she had an offer to buy her home for $240,000, but the appraisal came in at $195,000. They finally agreed on a price of $217,000.
“My realtor had previously warned me that there was what he called ‘great stuff’ going on with appraisals in Newark at this time because appraisers were basically pricing homes in Newark lower than that the market dictated, driving these huge gulfs,” she said.
The same thing happened to her twice while she was looking for a new home. One was valued more than $30,000 below its offer, and another was valued at more than $50,000, she said.
Because home values affect the assessments of other residences in a given neighborhood, artificially low assessments can deflate home values in entire communities. A task force on assessment discrimination convened last year by President Joe Biden found that predominantly black neighborhoods were the victims of the phenomenon.
“Something the task force specifically found is that, on average, homes in majority black neighborhoods are valued at less than half of those in neighborhoods with few or no black neighborhoods, and the take taking into account the characteristics and amenities of the neighborhood and the property could not explain the disparity,” said Andrea McChristian, director of law and policy for the New Jersey Institute for Social Justice.
The Senate and Urban Affairs Committee approved the bill by a 4-0 vote, with Sen. Holly Schepisi (R-Bergen) abstaining, saying she was concerned that amendments made to the bill during Thursday’s committee meeting only sees heavy penalties imposed on appraisers who unwittingly undervalue a home and drive appraisers away from certain communities altogether.
The amendments removed a requirement that the State Real Estate Appraiser Board find an appraiser to have “knowingly” conducted a discriminatory appraisal before imposing penalties.
“My concern is that if we rush in with something that’s so draconian on day one, that eliminates knowledge standards, that really doesn’t spell out due process in this area, that has a mandatory license suspension, let’s- are there potentially no appraisals in the very communities where we’re trying to make appraisals fair?” said Schepisi, who practices real estate law.
She said people who unwittingly undervalue a home due to bias should be subject to a fine, not a license suspension.
Sen. Troy Singleton (D-Burlington), who chairs the Senate Community and Urban Affairs Committee and is another of the bill’s sponsors, said Schepisi’s concerns make sense, adding that he would convey them to Pou .