Black History is American History. How can we leverage history for a better tomorrow.?
Across the country, in Washington state, and particularly in Seattle, there is a severe housing shortage, but the prices continue to climb and are truly unaffordable for many. Many people of color find themselves moving out of Seattle and going further North or South to obtain more affordable housing. But the story does not end there. Selling a house is a much different experience for African Americans.
Federal Home Loan agency Freddie Mac outlined 5 steps to selling your home: Finding and working with your agent; understanding the costs; preparing your home; negotiating and accepting the offer; and Closing. These steps seem fairly straight forward and can be made a bit more complex with buyers that have specific demands or challenges when buying a home. However, Black homeowners have discovered that selling their home has a few extra steps related to the color of their skin. These barriers can lead to a longer period to sell the home, a cheaper selling price, and fewer listings of the home and fewer potential buyers touring the home. Lori L. Tharpe writes: “If you are a Black person in America and you're going to sell your house, you have to go through the un-Black process before your house can be shown to prospective buyers. What that means is that you have to remove any and all visual evidence that Black people inhabit your property[1].” But what does that mean and what MUST you remove? This involves removing pictures from weddings photos, vacation photos, photos of family members, art, educational achievements. Additionally, wall décor[2]. I have pictures done by Black artist Annie Lee. But the problem runs deeper than just removing items from the home to “un-Black” it, it is also about who gets to sell the home.
In 1961, the National Association of Realtors (NAR) granted Black people the ability to join and access its benefits as NAR officially ended its exclusion of Black agents. However, the group lobbied against the Fair Housing Act ending discrimination in housing in 1968[3].
One major complicating fact is that “residences owned by Black people are undervalued and priced 23 percent lower than homes owned by whites, discrimination results in a smaller pool of possible clients and fewer commissions on properties at lower price points.[4]” So, an African American home seller must figure out a way to guard against having their home undervalued by as much as 23%. The answer might be employing a Black real-estate agent. However, there are barriers to that as well. Only 6% of Real-estate agents are African American, and they earn significantly less than their White Counterparts, with White real-estate agents earning 3 times more than Black agents[5]. African American agents must supplement their income with a steady job, with “Forty percent African American members selling homes in areas where the typical sales price was less than $199,999 in 2016 (25 percent for all residential specialists[6]).” But how does this work, how does an agent get into residential markets with higher priced homes and higher commissions? Is there a process or litmus test? Is there a length of time that an agent works in markets with lower priced homes before advancing to markets with higher priced homes? And finally, is there a certification or evaluation that must happen before advancing to higher priced markets?
Colete Coleman wrote in her article: Selling Houses While Black. “According to a survey from the N.A.R. of its members, the median for white real estate agents’ residential sales was $356,000, while the median for those of Black agents was $246,000. The median sales volume for white real estate agents was $1,998,000, while the median sales volume for Black agents was $474,500[7].” Much of the literature around this subject speaks to lower homeownership rate of Black Americans, homeowners and buyers wanting an agent that looks like them, and that many African American agents are not full-time agents. The literature also points out that White agents can weather the hard first one – to- two years with family and/or spousal financial support but fails to address why Black agents do not have access to properties that, when sold, would yield in a higher commission. There are many fees and associations to belong to as a real estate agent, those costs can be staggering for African Americans that may not have the financial backing to get through the first couple of years as an agent[8].
Finally, the valuation of the home. Appraisers have the expertise of valuing a home. In fact, the listing price can be closely aligned to the appraised value of the home. However, there is a long history of appraisers undervaluing the homes of Black Americans whether the house is in a predominately Black or White neighborhood. The result: Homes owned by Black sellers will sell for less, which will result in less equity and curb the ability of the seller to seek a home of similar or greater value. How is discrimination addressed concerning the appraisal of homes? “Home appraisers are bound by the Fair Housing Act of 1968 to not discriminate based on race, religion, national origin or gender. Appraisers can lose their license or even face prison time if they’re found to produce discriminatory appraisals. Title XI of the Financial Institutions Reform, Recovery and Enforcement Act, enacted in 1989, also binds appraisers to a standard of unbiased ethics and performance.[9]” Despite these laws in place to protect against discrimination, Black homeowners are powerless to get a fair appraisal of their homes. Here are the demographics of appraisers:
Appraisers are 59% more likely to work at private companies in comparison to government companies[10]. It is clear that the profession of appraisers needs greater diversity.
To become an appraiser, the following, in the state of Washington, is needed: 150 hour course of study, 2000 hours of supervised appraisals, and passing. The National Uniform Licensing Certification Examination, as well as a license in the state. The entire process costs approximately $1700. This is a two-year process with the last year being a full-time job to complete the required 2000 hours of supervised appraisals. In order to become a fully licensed appraiser, a bachelor’s degree is now required. It is still possible to complete 30 hours of course work at a community college and become an entry level appraiser, but the Certified Appraiser, which is now the industry standard, is what is necessary to work as an appraiser in many states[11].Further, it is not clear if these programs have included curriculum to address racism and bias in appraisals, nor is it clear that an equity lens has been applied to the process of becoming an appraiser and the appraisal process.“… homes in Black neighborhoods are valued roughly 21% to 23% below what their valuations would be in non-Black neighborhoods. Neighborhoods with a majority of Latino or Hispanic, Asian American , or White residents do not experience home price devaluation, using the same model[12].”
Abena and Alex Horton live in Jacksonville Florida and but their house up for sale. The first appraisal of their home came in at $330,000. Houses in their neighborhood sell from $350,000 to $500,000. The Hortons are a biracial couple and Abena, who is African American and a lawyer, suspected racism. She took the steps of “un-Blacking” their home, leaving behind pictures of her White husband and family. They setup another appraisal and she and her son spent the day at a store while her husband obtained the appraisal alone. The appraisal came in at $450,000[13], a difference of $120,000. Remembering that homeowners with $200,000 of wealth pass along that wealth to their children and other family members in the form of down payments[14]and assistance with the cost of tuition.
The Biden Administration, in an attempt to address the clear bias of home appraisals against Black Americans, developed and implemented the PAVE program in March 2022. The Property Appraisals and Valuation Equity (PAVE) is an interagency program that was designed to“…advance equity and root out racial and ethnic bias in home valuations[15].” The program has moved forward with meaningful actions:
1.Preventing algorithmic bias in home valuation.
2.Empowering consumers to take action against appraisal bias.
3.Increasing transparency and leveraging federal data to inform policy and improve enforcement against appraisal bias.
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4.Breaking down barriers to entry into the appraisal profession[16]
Buying a home is riddled with barriers and generations of racism and bias. Further, the process of selling a home is as just complex and filled with bias if you are a Black homeowner trying to sell your home. Reform of selling the home to address bias and increase equity has been put into motion by the Biden Administration, but it is unclear what the effect will be as the program is still in its infancy. The state of Washington has started to address the racism and bias ingrained in buying a home for Black Americans by providing funds for those who have been harmed by the generations of bias in purchasing a home related to redlining and obtaining a home loan that was unfair and non-equitable[17].
If this country is to turn a page on racism, discrimination, and bias, interventions must come from all levels and entities. Federal, state, and county governments must put meaningful skin in the game to seriously address a system that has denied Black Americans generational wealth for many generations. The real estate and appraisal industries have had a heavy hand in tilting homeownership and home equity away from Black Americans, and banks have been a huge barrier that has proven to be costly to Black Americans in more ways than have ever been discussed. See previous article on buying a home. https://lnkd.in/dZ3H9-GZ
“The American real-estate industry believed segregation to be a moral principle. As late as 1950, the National Association of Real Estate Boards code of ethics warned that a Realtor should never be instrumental in introducing into a neighborhood ... any race or nationality, or any individuals whose presence will clearly be detrimental to property values. A 1943 brochure specified that such potential undesireables might include madams, bootleggers, gangsters - and a colored man of means who was giving his children a college education and thought they were entitled to live among whites." Author, Ta-Nehisi Coates.
