Shane Lanham first heard he was being sued for racial discrimination from a New York Times reporter who referred to as him for remark. That story ran with the headline: Home Appraised With a Black Owner: $472,000. With a White Owner: $750,000.
The New York Times article described how Drs. Nathan Connolly and Shani Mott, who have been each professors at Johns Hopkins University in Baltimore, had taken down household images and “whitewashed” their house, getting a second appraisal for a refinance that valued their house at practically $300,000 greater than Lanham’s appraisal. They sued Lanham and his Parkville, Maryland-based enterprise, 20/20 Valuations LLC, in 2022.
“The accusation is damning sufficient, however it was an unfair narrative,” Lanham mentioned in an interview with American Banker. “The case has been following me round for 3 years. It was offered to the general public as a typical observe for appraisers to low-ball minority house values, and I did not imagine it was true and I need to play an element in debunking that narrative.”
READ MORE: Financial threat from flawed value determinations runs into the billions
Last month, District Court Judge Stephanie A. Gallagher dismissed the lawsuit towards Lanham for lack of proof. She discovered that the plaintiffs fell wanting proving discriminatory intent and didn’t have an appraisal professional to assist the a lot increased $750,000 appraisal.
Lanham mentioned he all the time thought the second appraisal was too excessive and that “if that they had vetted the value determinations from the very starting, they won’t have wanted three years of litigation.”
“When the ultimate verdict of the choose was that there was not sufficient proof to proceed, I used to be relieved however not stunned,” he mentioned.
Still, Judge Gallagher additionally dismissed Lanham’s countersuit for defamation. The choose famous that after submitting their lawsuit, the plaintiffs “instantly commenced a nationwide media blitz.”
Connolly and Mott obtained an undisclosed settlement from Loandepot.com, which agreed to make changes to its appraisal grievance course of. Mott handed away in 2024. The couple was represented by the legislation agency Relman Colfax PLLC, and have till mid-August to attraction the courtroom’s dismissal of the suit.
“It’s honest to say that these circumstances may be troublesome to show,” mentioned Tim Ofak, a member at legislation agency Weiner Brodsky Kider, who was not concerned within the case. “Their professional’s testimony was partially stricken [by the judge] and they didn’t have factual proof to refute the defendant’s consultants.”
A separate appraisal bias lawsuit in Ohio that additionally obtained widespread media protection was dismissed in March by a district courtroom choose as a result of the discriminatory allegations couldn’t be sufficiently substantiated. In that case, the lawsuit is nonetheless ongoing towards the lender, $664 billion-asset U.S. Bank in Minneapolis, for its decision-making course of in denying the borrower’s cash-out refinance utility primarily based on the house’s collateral and the debtors’ historical past of delinquency.
Notably, fewer than a dozen appraisal bias lawsuits have been filed within the final 5 years, by some estimates. Most of the fits filed by householders concerned allegedly low-ball value determinations looked for the aim of refinancing whereas rates of interest have been low.
In 2021, the Biden administration responded to the appraisal bias claims by creating the Property Appraisal and Valuation Equity activity power to root out racial and ethnic bias in value determinations. In July, Housing and Urban Development Secretary Scott Turner disbanded the initiative. Even so, the Appraisal Qualifications Board will start requiring new qualifying and persevering with schooling programs for all appraisers to incorporate a deal with valuation bias and honest housing legal guidelines and laws subsequent yr.
Lanham famous that appraisal bias “was a scorching subject just a few years in the past, after I obtained accused … however it would not really feel prefer it’s as scorching a subject because it was.”
Long historical past of discrimination
“Maybe in some unspecified time in the future in time, if it turns into scorching once more, my case legislation might be referred again to and be useful ultimately,” he added.
The historic observe of redlining has created long-standing disparities in house values.
Research by the Brookings Institute, Urban Institute and tutorial researchers have discovered that houses in majority-Black neighborhoods are devalued and usually are appraised at decrease values than comparable properties in majority-white neighborhoods. Some analysis has centered on how appraisal valuations have contributed to a generational wealth hole.
“Appraisal bias is arduous to detect and most of the people who expertise appraisal bias do not have the attention that they could be experiencing unfairness,” mentioned Lisa Rice, president and CEO of the National Fair Housing Alliance, who has labored on a whole bunch of appraisal bias circumstances. “You can rent two or three appraisers to appraise the identical property they usually can every decide completely different comparables, so there is a number of subjectivity to the method.”
Andre Perry, a senior fellow within the Metropolitan Policy Program at Brookings, mentioned that there is “tons of proof of discrimination in housing.”
“On its face, America has a protracted historical past of with the ability to discriminate towards Black householders and neighborhoods,” mentioned Perry, the creator of the 2025 e-book “Black Power Scorecard: Measuring the Racial Gap and What We Can Do to Close It.”
“There is a lot subjectivity within the course of whenever you’re speaking about racial bias.”
Tobias Peter, co-director of the American Enterprise Institute’s Housing Center and an AEI analysis fellow, mentioned he has discovered flaws with analysis claiming systemic bias by appraisers.
Appraisal bias “is extra pushed by a few unhealthy apples than intrinsic bias,” mentioned Peter, who served as an professional witness within the case for Lanham.
Under the Trump administration, HUD has highlighted analysis claiming components unrelated to race, together with revenue and common credit score scores, are extra important drivers of variations in house values and value determinations.
Yet, in most actual property transactions, the appraiser is the one occasion working for a set payment whereas realtors and mortgage bankers are commission-based.
“If there was a peer evaluation of all these value determinations, I do not know that a number of these circumstances would go ahead,” mentioned Tony Pistilli, president of valuations at Restb.ai, a know-how firm that makes use of AI to automate property valuations and actual property listings.
Bill Dallas, a longtime mortgage banker, former president of Finance of America Mortgage, and chairman of Dallas Capital, a household workplace, mentioned that “opposite to some narratives, there is restricted proof that systemic bias in value determinations is widespread or driving disparities in lending outcomes in the present day.”
Appraisers function below strict federal tips and value determinations themselves are extremely regulated, standardized, and reviewed by underwriters and valuation fashions. Lenders observe that there are a lot of checks in place — from automated valuation fashions to investor due diligence — that create a number of layers of validation and cut back the chance of particular person bias affecting lending selections. Most underwriting selections are hardly ever primarily based on a single appraisal alone, particularly for many loans that are backed by Fannie Mae, Freddie Mac or Ginnie Mae.
Donna Halfpenny, a self-employed Chicago appraiser and realtor, mentioned most appraisers settle circumstances as a result of they run out of cash to struggle since most errors and omissions insurance coverage policy protection — a sort of legal responsibility insurance coverage for appraisers — is restricted to $100,000. She additionally took concern with media protection of the case and the shortage of follow-up, noting “there is not one confirmed case of appraisal bias.”
“Claims of appraisal bias have been blasted all through the media for a number of years now, however they by no means cowl the outcomes, and that’s not honest to a complete occupation,” she mentioned.
Congress has additionally been energetic. Sen. Raphael Warnock, D-Ga., who sits on the Senate Banking Committee, provided a invoice earlier this yr that would require mortgage lenders to permit shoppers to request a second appraisal, or reconsideration of worth, primarily based on a listing of 9 “unacceptable” appraisal practices. The listing consists of references to any crime charges or crime statistics in an appraisal, and any evaluation that depends on inappropriate comparable properties.
Still, houses priced beneath $400,000 don’t require an appraisal from Fannie Mae or Freddie Mac. The government-sponsored enterprises have made a giant push for appraisal waivers that permit eligible debtors to bypass an in-person appraisal. The variety of appraisal waivers reached a peak of practically 50% throughout the pandemic, however have dropped to roughly 12% a yr on common.
Art vs. science
In the Connolly v. Lanham case, Judge Gallagher, a Trump appointee, famous that an appraisal “is to some extent an artwork, not a science, [and] a point of variability is to be anticipated.”
Lanham claimed his appraisal was carried out in a “honest and affordable trend, addressed the precise circumstances of the plaintiffs’ property, and aligned with skilled norms and requirements,” Gallagher wrote. The choose excluded a portion of the testimony of the plaintiffs’ professional, Junia Howell, a visiting assistant professor of sociology on the University of Illinois Chicago, as a result of she is not an appraiser. Howell has written concerning the rising racial inequality in house value determinations.
“Without a professional appraiser as an professional, Plaintiffs supply no resolution for the way the appraisal ought to have been finished to adjust to the USPAP or different skilled norms,” the choose wrote, referring to the Uniform Standards of Professional Appraisal Practice. USPAP is a set of moral and efficiency requirements required for state-licensed and state-certified appraisers that reinforce the rules of the Fair Housing Act, which prohibits discrimination in housing primarily based on race, shade, faith, intercourse, nationwide origin, familial standing, and incapacity.
The lawsuit centered on the placement of the house, which was on a serious highway within the historic Homeland space of Baltimore.
“Although it is comprehensible that Plaintiffs would have most popular to make use of increased worth houses in a distinct a part of Homeland, the one appraisal consultants on this case have testified that it was correct to prioritize houses north of Homeland Parkway for this appraisal,” the choose wrote.
Since value determinations are primarily based on a house’s location and worth relative to different, comparable houses close by, allegations of racism are powerful to show.
“Although this Court credit Plaintiffs’ place that an appraisal throughout the universe of honest, correct, and affordable value determinations might however be primarily motivated by discrimination (that is, the explanation for a decrease however honest appraisal outcome could possibly be discrimination, not the placement or situation of the house), neither Plaintiffs nor Dr. Howell adduce any proof that discrimination was, in actual fact, Defendants’ actual cause,” Gallagher wrote within the 27-page opinion dismissing the lawsuit.
Lanham estimates that his authorized prices totaled greater than $200,000. He offered property, borrowed cash from household and opened a GoFundMe account to struggle the lawsuit. He credit his errors and omissions insurance coverage with masking greater than $100,000 of his prices, which helped him “get by the trial and attempt to clear my title.”
Claims of appraisal bias can financially smash an appraiser, and a few have obtained hate mail and demise threats, appraisers mentioned.
“It affected my enterprise an awesome deal. My revenue obtained minimize by 66% within the first two years after the suit was filed and I struggled for a few years to outlive,” Lanham mentioned. “What I used to be accused of wasn’t true, it wasn’t provable and that’s vindication.”
