Most people don’t think much about how their house gets appraised until the number comes back lower than they expected. At that point it stops being an abstract exercise and starts determining real things: how much equity they can borrow against, whether a refinance goes through, how much cash a buyer needs to bring to closing. For Black homeowners, there’s another problem: research suggests that number can reflect something beyond the physical condition of the house.
A widely cited Brookings study put actual figures on this. Researchers found that owner-occupied homes in majority-Black neighborhoods were valued about 23% lower than comparable homes in neighborhoods with very few Black residents, even after controlling for the physical characteristics of the homes and their amenities. That gap came out to roughly $48,000 per home, or $156 billion in lost value across the country. A follow-up analysis from the same institution tried to isolate how much of that was specifically attributable to bias in the appraisal process itself, as opposed to other market forces, and landed on a range of 9% to 19%. In other words, appraisal bias is real but it’s only part of a much larger story about how these neighborhoods came to be undervalued in the first place.
More recent federal research points in the same direction. A 2024 Federal Housing Finance Agency working paper found that appraisals coming in below the contract price were at least 23% more likely in majority African American neighborhoods than in comparable neighborhoods with no Black residents — and that gap held up even after accounting for the usual appraisal inputs and for which specific appraiser was doing the work.
None of this requires an appraiser to be consciously biased for the pattern to show up. That’s arguably what makes it hard to fix.
How comps carry old discrimination into new valuations
The backbone of most single-family home appraisals is the sales comparison approach — an appraiser finds recently sold homes nearby, adjusts for differences in size, condition, lot, bedrooms and so on, and arrives at a number. It’s a reasonable method on its face. Buyers really do compare houses to similar houses, so recent sales are legitimate evidence of what a market will pay.
The problem is where those sales come from. If a neighborhood was redlined decades ago, or has seen less investment, or has had less access to credit, the homes that sold there will tend to reflect all of that history in their prices. An appraiser pulling comps from that neighborhood isn’t inventing a low number out of nowhere — they’re drawing on sales data that already has decades of disadvantage built into it. And because that new appraisal becomes a comp for the next sale, the cycle doesn’t really have a natural stopping point.
To be fair, not every low appraisal in a Black neighborhood is evidence of discrimination. Some homes genuinely have condition problems. Some neighborhoods genuinely have weaker demand, or higher taxes, or environmental issues that legitimately affect value. The harder and more useful question, for anyone trying to figure out whether they’ve been treated unfairly, is whether the appraisal actually reflects the property in front of the appraiser — or whether it’s just repeating whatever the market has said about that neighborhood for years, accurate or not.
Andre M. Perry of the Brookings Institution has made a version of this argument that goes beyond real estate math: how a society values Black-owned property, he’s said, tends to track pretty closely with how it values Black people.
The uncomfortable rise of “whitewashing”
A handful of Black homeowners have tried something more direct to test whether race was affecting their appraisal: they’ve removed anything in the house that signals a Black family lives there, and had a white person stand in for the walkthrough.
Abena Horton and her husband Alex, who live in Jacksonville, tried this after their home first appraised at $330,000. For the second appraisal, Horton — who is Black — took down family photos and other markers of Black identity and let Alex handle the visit alone. The new appraisal came back at $465,000, a difference of well over $100,000.
A California couple, Paul Austin and Tenisha Tate-Austin, describe something similar happening in Marin City. Their home was appraised at $995,500 in 2020. After they removed signs of their Black identity and had a white friend pose as the owner for a second appraisal, a different appraiser valued the same house at $1,482,500. They eventually sued under the Fair Housing Act and settled, after the Justice Department had already weighed in with a statement arguing that appraisers can be held liable under that law.
These are striking numbers, and it’s understandable why they’ve gotten so much attention. But it’s worth being honest about their limits as evidence. Two different appraisers, visiting a house months apart, could reasonably land on different numbers for reasons that have nothing to do with race — different comps available at the time, a different read on the home’s condition, a different effective date for the market. A six-figure jump after removing every trace of Black identity from a home is certainly worth investigating closely. It isn’t, on its own, a controlled experiment that isolates race as the cause.
Where income changes the calculation
If a property actually generates income, there’s a different and arguably more defensible way to approach its value: instead of asking what similar houses sold for, you ask what the asset itself earns.
This is the income capitalization approach, and it’s standard in commercial and multifamily appraisal work. Net operating income — NOI — is rental and other property income minus operating expenses. Under the most common version of this method, you divide the property’s stabilized NOI by a market capitalization rate to get its value. So a building generating $120,000 in stabilized annual NOI, in a market where similar properties are trading at a 7.5% cap rate, would be valued at roughly $1.6 million.
The formula itself isn’t complicated. What takes real scrutiny is the inputs that go into it. “Stabilized” means an appraiser can’t take an unusually strong month of collected rent and treat it as the new normal — vacancy assumptions have to be realistic, market rents have to be supportable, and every recurring expense (taxes, insurance, utilities, repairs, management) has to actually be accounted for rather than left out. Mortgage payments and the owner’s personal taxes don’t belong in this calculation at all, since those are financing and tax decisions rather than anything about how the property performs. Federal banking regulators describe the approach the same way: it converts a property’s expected future income into a present value, and it works best when that income stream is genuinely stable rather than volatile.
Done properly, this can surface real value that a sales comparison would miss — a fully leased building with a solid rent roll has an earnings history that speaks for itself, in a way that a house down the street simply can’t.
Knowing when this approach actually applies
The income method works best for properties that people actually buy for their income: apartment buildings, mixed-use developments, office buildings, retail centers, industrial space. That’s the segment where investors are pricing based almost entirely on what the asset throws off.
Two- to four-unit residential properties sit somewhere in between. Rental income matters for these, but a lot of standard mortgage appraisal forms still lean mostly on sales comparison, using something like a gross rent multiplier as a supplement rather than running a full commercial-style income analysis. Fannie Mae’s own small residential income property form reflects that hybrid approach — it has sections for both.
A standard owner-occupied single-family home is a different case entirely. If a sales-comparison appraisal comes back lower than a homeowner hoped, they generally can’t demand that the lender switch to an NOI-based valuation instead — that’s just not how the house is being bought or sold in that market. Which method applies really does depend on the type of property, its best use, how buyers in that specific market actually behave, and what the lender’s appraisal assignment calls for.
Even in cases where the income approach is the right one to use, the cap rate itself is a judgment call, not a fixed input. A higher cap rate means a lower value, and cap rates come from watching how investors are actually pricing similar deals. If the available data on those deals is thin, or if the same neighborhood-level disinvestment that affects home sales is also affecting how investors price commercial buildings there, the bias doesn’t necessarily go away just because you switched methods. It can just show up somewhere else in the math.
Actually challenging an appraisal you think is wrong
Before anything else, get the full written appraisal report and read it closely. Look at the square footage, the condition notes, the list of comps, the effective date, whatever renovations or accessory units are or aren’t mentioned. A surprising number of disputes turn out to hinge on a factual mistake somewhere in the report, and that’s a much easier thing to fix than trying to prove someone’s intent.
From there, look hard at the comparable sales the appraiser actually used. Were there better or more recent sales nearby that got skipped? Are the comps that were chosen genuinely similar to the subject property, or noticeably worse? Were the boundaries the appraiser drew around “the neighborhood” applied consistently? FHFA’s research has specifically pointed to how sale prices get adjusted for timing as one area tied to racial disparities in low appraisals, so that’s worth checking carefully.
If the numbers still look off after that, the formal path forward is a Reconsideration of Value request, or ROV, filed through the lender. Fannie Mae requires lenders to have a process for borrowers who believe their appraisal was unsupported, deficient, or discriminatory, though the framework caps how many alternative comps a borrower can submit at five — so it’s worth picking the strongest ones rather than sending everything you can find.
For an income-producing property specifically, that ROV package should include the current rent roll, signed leases, a full year of income and expenses, vacancy history, and documentation for taxes, insurance, utilities and repairs. The goal isn’t to make the property look more profitable than it is. It’s to show the appraiser exactly what the property is actually earning, in case that wasn’t given enough weight — or any weight at all — the first time around.
If there’s reason to think race played a role in how an appraisal was handled, it’s worth preserving everything: the report itself, emails with the lender or appraiser, photographs of what the house looked like during each visit, dates, and the names of anyone who was present. HUD’s Office of Fair Housing and Equal Opportunity takes complaints specifically involving discrimination in property appraisals, and most states also have a licensing board that handles complaints against individual appraisers.
None of this guarantees a better number. Appraisals are still built on market data, and that data still reflects decades of decisions that had nothing to do with any individual homeowner. But a careful, well-documented challenge puts a homeowner in a far stronger position than simply accepting the number without asking how it was built.
Frequently Asked Questions
Can a homeowner demand an NOI-based appraisal instead of residential comps?
Usually not. NOI-based direct capitalization is most relevant when market participants value the asset primarily for its income. A typical owner-occupied single-family home is normally driven more by comparable sales.
Does a higher NOI automatically mean a higher appraisal?
No. Value also depends on whether the NOI is sustainable and on the market cap rate. Inflated rents, understated expenses or an unsupported cap rate can make an income valuation unreliable.
Does “whitewashing” a home prove appraisal discrimination?
Not by itself. A large difference between two appraisals can justify scrutiny, especially when racial cues changed, but different appraisers may choose different comps or assumptions.
What should an owner include in an ROV request?
Focus on verifiable errors, stronger comparable sales, omitted property features, unsupported adjustments and relevant market data. For an income property, include leases, rent rolls and operating statements where permitted.
Where can suspected appraisal discrimination be reported?
HUD’s Office of Fair Housing and Equal Opportunity accepts housing-discrimination complaints, including allegations involving property appraisals. Owners can also examine state appraiser-licensing complaint channels.