CINCINNATI — A Cincinnati landlord has filed a federal complaint, alleging his property was undervalued due to racial discrimination in the appraisal process.
Terry Horton has owned 951 Dana Avenue, a multi-unit residential property in North Avondale, for more than 10 years. He rents the units to low-income tenants who qualify for Section 8 housing and are predominantly Black.
Horton, who is Black, believes racial bias impacted the first appraisal he received in February 2022 when he sought to refinance the property. He wanted to refinance in order to purchase another property to create additional housing units and a storefront.
“My initial evaluation from the bank, they thought it would be valued at $500,000,” Horton said.
Horton said he was shocked when his appraisal came back, valuing the property at $359,000.
“I started to look at it and I’d seen that there was a lot of errors in the valuation,” he said.
Horton said the appraisal underreported rental income, square footage and bedrooms. He said the appraisal failed to look at comparable properties recently sold on the same street.
He said he pointed those inaccuracies to the bank.
“They told me that they couldn't change their appraiser’s mind,” Horton said. “They reached out to him. They couldn't get in contact with him.”
Horton contacted a friend who works in the appraisal industry to take a look. Real estate appraiser Thaddaus Dawson Jr. appraised it at $560,000.
“Based on the complexion of Mr. Horton and the people that live here, and other comparable sales, it just wasn't right and it reeked of being biased,” Dawson said.
According to the complaint, Horton tried disputing the appraisal with the appraisal management company, including comparisons to the recent sales of nearby properties. The company refused to change its original valuation.
The complaint alleges Horton contacted his lender with concerns, and was told to either use the original valuation or pay for another appraisal out of pocket.
Horton paid $870 for a third appraisal. The appraisal valued the home at $450,000. The lender agreed to accept the new valuation, but by then, months had passed. According to the complaint, the interest rate climbed to 5.30% and Horton said refinancing for the new project had become too expensive.
“It’s devastating,” he said. “It’s traumatizing because, to me, it felt like I was being robbed of my opportunity to create generational wealth to pass down to me and my family, for reasons that I couldn't explain.”
Horton contacted the National Community Reinvestment Coalition (NCRC), who received a report from Cincinnati-based appraisal expert Derrick Mayes. The complaint says Mayes issued a report stating “it is our opinion that some degree of bias is apparent in the reconciliation of values, which fall squarely on the very low end of the value spectrum,” and concluding that “the appraiser was negligent and violated the competency requirement in [Uniform Standards of Professional Appraisal Practice] USPAP.”
After that, Horton and NCRC filed a complaint with the U.S. Department of Housing and Urban Development. The department confirmed to WCPO it received the complaint and is looking into it.
WCPO has reached out to the lender and appraisal management company named in the complaint and has not yet received a response.
WCPO made several attempts to try and contact the company contracted to conduct the initial appraisal. However, WCPO found nothing listed with its name online, even on the Ohio Secretary of State’s website.
“Appraisal bias is a huge problem,” said Jake Lilien, counsel for Fair Housing Enforcement at the NCRC. “We know that homes in Black neighborhoods and Latino neighborhoods are not being given the same kind of valuations as homes in White neighborhoods.”
“One of the things moving forward trying to get solutions is (getting) more people of color into the valuation space,” Dawson said.
More than 92% of property appraisers and assessors in the United States are white, according to Bureau of Labor statistics.
“We’re in the middle of a national conversation right now about the pervasiveness of discrimination in housing and lending,” said Horton’s attorney Sharon McGowan. “There's work for everyone to do here. And we are part of the process of making sure that that work gets done.”
Horton hopes his complainthas an impact.
“I hope to achieve that this doesn't happen to anyone else,” said Horton.
You can read Horton's full complaint here.
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