By Nick Swartsell
CINCINNATI, OH — Terry Horton says he had a good plan. He was going to refinance a North Avondale apartment building he rented to predominantly Black residents, about half of whom use Section 8 vouchers, in order to buy another building he would also offer as affordable housing.
But Horton, who is also Black, was taken aback at the low appraisal he got — about $359,000. He was expecting closer to $500,000, especially when a comparable property across the street sold for about that price.
He believes racial bias played into the initial appraisal, and last week he filed a complaint with the U.S. Department of Housing and Urban Development. HUD acknowledged to WVXU it has received that complaint and is investigating it. WVXU has reached out to the lender and appraiser named in that complaint for comment.
At the center of the filing: errors Horton says lowered the value of his property considerably, and a refusal to correct them after they were pointed out.
“I started to go over the appraisal,” Horton says. “And I noticed that he had missed some of the rents, and some of the square footage. So I brought it to the lender’s attention.”
The monthly rental income the property generated was off by hundreds of dollars, he says, and its square footage was off by hundreds of feet. In addition, two of the units in the building were listed as three bedrooms when they actually have five. And in finding comparable properties, the appraiser didn’t consider the property across the street that had recently sold for almost $500,000.
Horton says the lender shrugged off the errors and refused to adjust its offer, even after he got a valuation of $560,000 from a friend who works in the appraisal industry. Instead, the lender advised him to pay for another appraisal from a different company. Horton paid $870 for that appraisal, which came back significantly higher — about $450,000.
Two months after the initial appraisal that Horton says was erroneous, the lender eventually adjusted its offer. But interest rates had risen, and Horton’s plan was no longer financially viable.
Appraisal bias ‘is pervasive’
The National Community Reinvestment Coalition, an economic equity group, joined him in his HUD complaint. NCRC counsel for fair housing enforcement Jake Lilien says the organization believes the factual discrepancies in the initial appraisal make Horton’s case clear-cut.
“It appears that the appraiser went out of his way to arrive at the lowest possible valuation for Mr. Horton’s property,” Lilien says. “There were clear, objective factual and methodological errors in the appraisal. They got the square footage of the property wrong. They got the rental income wrong. When the errors were addressed, the appraiser chose not to revise the valuation.”
Lilien says appraisal discrimination is a pervasive problem across the country. He points to studies like one NCRC conducted in Baltimore that found valuations on properties owned by mixed-race couples ended up significantly higher when the white partner met the appraiser and signs of the Black homeowner — photos and other personal items — were removed, compared to when the non-white partner was present and their photos were evident in the home. Other reports suggest those weren’t isolated incidents. And a high-profile local case in 2021 involving Loveland homeowners Aaron and Erica Parker suggests appraisal discrimination can happen here in Cincinnati.
“We know that appraisal bias is a pervasive problem because of a recent study that examined how often homes are undervalued by appraisers compared to how much they sell for,” Lilien says. “The study showed that homes in Black neighborhoods were 50 percent more likely to be undervalued than homes in white neighborhoods.”
That, equity advocates say, can end up meaning fewer opportunities for Black families and individuals to build wealth.
Horton says his appraisal experience cost him the opportunity to advance himself economically — and to provide more Section 8 housing in a market where affordable housing is scarce.
“When you apply for an appraisal, you don’t think you have to worry about biases being leveled against you that prevent you from doing everyday processes you have to do during a loan process,” Horton says. “So, it was devastating from that point.”