Dunn Appraisals, LLC

Navigating Bias in Real Estate Appraisals: Essential Insights for Attorneys

The Importance of Objective Real Estate Appraisals

In the realm of real estate law, an attorney’s choice of appraiser can significantly influence the outcome of a case. Real estate appraisals often include descriptions of neighborhoods that are historically laden with subjective terminology. While appraisers might not see the harm in using superlatives, this practice can lead to bias and undermine the credibility of the appraisal report.

The Role of Appraisers in Market Area Identification

Appraisers must understand that their primary role in describing a neighborhood is to identify the factors influencing marketability. By avoiding subjective language and sticking to factual descriptions, appraisers can ensure their reports are defensible and credible. This practice is crucial for attorneys who rely on these reports to support their legal arguments.

Compliance with Professional Standards

The Uniform Standards of Professional Appraisal Practice (USPAP) serves as the rulebook for real estate appraisers. It mandates that appraisers identify characteristics relevant to the intended use of the appraisal, such as location, legal, and economic factors. Adherence to USPAP is essential for meeting the expectations of intended users, including attorneys, who depend on these reports for legal purposes.

Detailed Neighborhood Analysis

A thorough and objective analysis of a neighborhood helps appraisers determine where to find comparable properties for various valuation approaches. Attorneys benefit from such analyses, as they provide a solid foundation for legal arguments related to property value. Characteristics such as structure types, architectural styles, land use, site sizes, and street patterns must be factually described to avoid any perception of bias.

Avoiding Subjective Terminology

Attorneys should ensure that appraisers avoid using subjective terms such as “pride of ownership,” “good neighborhood,” or “desirable location.” These terms are not only imprecise but can also lead to misunderstandings and accusations of bias or discrimination. An appraisal report must focus on objective features and amenities of the neighborhood, ensuring that conclusions are based on factual evidence.

Personal characteristics like race, religion, or ethnicity of the neighborhood occupants are not relevant and are not factors that affect the value or marketability of the property. The use of subjective terminology should be avoided and includes the following:  

  • pride of ownership
  • no pride of ownership, lack of pride of ownership  
  • poor neighborhood
  • good neighborhood
  • crime-ridden area
  • desirable neighborhood or location
  • undesirable neighborhood or location
  • any reference to nationality, race, family orientation, etc 

Under USPAP guidelines, such descriptors are conclusions. Conclusions or opinions need to be “worthy of belief,” language used in USPAP’s definition of a credible assignment result. 

 

Legal Implications of Biased Appraisals

Using subjective language in appraisal reports can have serious legal implications. It opens the door to accusations of bias, which can be detrimental in legal proceedings. Attorneys must select appraisers who understand the importance of objective analysis and can produce reports that withstand legal scrutiny.

The Attorney’s Role in Appraisal Selection

By selecting appraisers who adhere to USPAP guidelines and avoid subjective terminology, attorneys can protect their clients’ interests. An unbiased and well-supported appraisal report strengthens legal arguments and provides a reliable basis for litigation or negotiation.

In conclusion, attorneys must prioritize choosing appraisers with the skills and abilities to produce unbiased, factual reports. This practice not only enhances the credibility of the appraisal but also supports the legal process, ensuring fair and just outcomes for clients.