Black East Oakland homeowner beats system after lowballed $155K in appraisal
OAKLAND, Calif. (KGO) -- Two longtime friends and business partners reached out to ABC7 News with a story of what they believe is discrimination in the appraisal process. The men believe the East Oakland home was hit with a lower value due to the color of their skin and because of who lives in their neighborhood.
"Something's not adding up here," said homeowner Braunz Courtney.
Courtney and his longtime friend and business partner Jamar Mears were stunned when an appraisal for the home on 57th Avenue in East Oakland came in at $575,000 in December of 2020.
"I was initially shocked and I thought I was seeing something different than what I was seeing," said Courtney.
He purchased the 96-year-old home in 2015 at the low price of $305,000 when it required a considerable amount of updates.
Courtney added a second bathroom to the three-bedroom home and updated floors and appliances.
Earlier, in 2019 Courtney got the home appraised so he could take out money for an even larger project of building an Additional Dwelling Unit (ADU).
He tells ABC7 News the home appraised for $631,000 then.
Courtney then built a 500 sq/ft one bed, one bath ADU in his backyard that he now rents out on Airbnb. An ADU is an Additional Dwelling Unit, often referred to as an in-law suite.
The home then appraised lower after the massive renovations.
That's when Courtney's business partner Jamar Mears, a licensed real estate agent, realized something was amiss.
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"After putting over $150,000 into the home you're telling me a year later, it's $25,000 less?" said Mears.
Mears began investigating the comparable homes used in the appraisal report and found the homes used were in worse shape and the in-law unit Courtney built on the lot was only valued at $10,000.
That's when the duo asked their mortgage broker to see what could be done.
Glover: What makes you feel as though there was something discriminatory happening?
Mears: The comps he tried to present -- this doesn't even make sense even just looking at the pictures of them and the square footage. He's supposed to be an appraiser and have some type of formal training and this is what (he) says is a comp? For me, there was definitely some discrimination going on. And then when I come in as the licensed realtor and say 'hey here are some comps right here' and he wasn't even receptive to it and your response is 'those are exclusive neighborhoods'?
Courtney: He was just like, let me give you the bottom of the barrel as a comp versus something that's truly comparable: the size, the AUD, the updating.
The men said the appraiser would not budge on the evaluation and the lender sided with the appraiser.
That's when the unexpected happened and three months into the refinance process, the mortgage broker advised the men to pull out and go with a different lender.
The broker also agreed to pay for the new appraisal.
A month later, the property appraised for much higher.
"It came back at $730,000. Over $100,000 more than what it originally appraised for," said Courtney.
After reviewing the appraisals, ABC7 News calculated a $155,000 difference between the appraisals conducted a month apart.
The biggest difference in the two appraisals is the comparable homes listed to determine value.
The six homes surveyed in the December 2020 appraisal average $591,000 in value when adjusted.
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Comparatively, the six homes surveyed in the final appraisal averaged $703,000 dollars when adjusted.
The in-law suite was also valued at $20,000 in the final appraisal compared to just $10,000 in the 2020 appraisal.
Courtney and Mears believe the difference in the reports shows the appraiser in question had implicit biases about the value of homes in East Oakland, an area that's predominately Black and Latino.
As our reporting has shown, undervaluation of Black-owned property is a systemic issue that can affect the value of entire neighborhoods over time.
San Francisco Assemblymember David Chiu acknowledge this in a recent interview with ABC7 News.
"If years ago a particular property was appraised at a lower level because of the color skin of whoever owned (the property). You compound that over the years as ownership changes and these appraisals can get baked in whether someone knows it or not," said Chiu.
ABC7 News has led the charge on uncovering discriminatory practices in home appraisals that's now getting the attention of lawmakers in Sacramento to come up with a fix.
Until those changes are in place, this discrimination continues to affect Bay Area families every day.
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ABC7 News reached out to The Appraisal Foundation for comment.
TAF is the U.S. organization authorized by Congress to set standards for real estate appraisers.
TAF President Dave Bunton provided the following statement:
"Any allegations of discrimination are a serious matter as the very standards an appraiser must follow in conducting an appraisal prohibit bias of any kind. The consumer's lender is responsible for determining how a home is valued in a refinance and hiring an appraiser if they deem one necessary. If a consumer feels that their home has been undervalued, they should go to the lender for next steps, including the possibility of requesting a reconsideration of value."
But in Courtney's case that did not work.
Courtney and Mears now join the list of families who have shared their story with ABC7 News with similar claims of racially biased appraisals and call for elected representatives to take action.
"We have a community now of other people who've been through it and we can work together," said Courtney.
"I'm happy that you're out here giving people voices so we can address the situation," said Mears.
