To build, buy, or refinance. Call our experts at: phone icon1-844-422-3622

AAFMAA Mortgage Services

What is Appraisal Discrimination? (and How to Challenge it)


Housing discrimination remains a factor for some homeowners more than 50 years after the passage of the Fair Housing Act of 1968, which “prohibited discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, sex, (and as amended) handicap and family status”, per HUD.

Example of Appraisal Discrimination

In 2021, Dr. Nathan Connolly and his wife, Dr. Shani Mott, both of whom are African American, wanted to refinance their four-bedroom, 2,600-square-foot home in the North Baltimore neighborhood of Homeland to take advantage of low interest rates. Connolly and Mott, both professors at Johns Hopkins University, had purchased the home together in 2017 for $450,000 and had made about $35,000 in improvements, including a new $5,000 tankless water heater.

The appraiser who initially visited their home put its market value at $472,000, much lower than the couple had expected given the average home sales price in their area and the money they’d invested.

Their refinancing application was denied, but Dr. Connolly, an expert in redlining, (“the practice of denying a creditworthy applicant a loan for housing in a certain neighborhood even though the applicant may otherwise be eligible for the loan”, per the Federal Reserve Board), decided to fight back. The couple applied for a new loan with a different lender. Before the second appraisal they removed photos of their own family and their children’s artwork and put out photos of white families. They asked a white colleague to pretend to stand in as the homeowner during the appraisal. The second appraiser valued the home at $750,000 — a difference of nearly $300,000.

In August 2022, the couple filed a lawsuit against the first appraiser and the original lender for racial discrimination, citing violations of the federal Fair Housing Act, the Equal Credit Opportunity Act, the Civil Rights Act of 1866, and Maryland fair housing laws.

Related: Changes Coming for VA Loan Appraisals in 2023

The Fair Housing Act of 1968

The Fair Housing Act of 1968 has special significance in February, during Black History Month, as its passage closely followed the assassination of Dr. Martin Luther King, Jr. on April 4, 1968. King had famously rented an apartment in Chicago’s West Side to bring attention to living conditions in a “typical” Black neighborhood, and he led marches for fair housing there. President Lyndon B. Johnson utilized the tragedy of King’s death to urge Congress to pass the Fair Housing Act, which had been stalled for two years.

Related: Comparing Home Appraisals for VA, FHA and Conventional Loans

Appraisal Discrimination Protection for Military Buyers

Home appraisals are needed for all types of loans (VA, FHA and conventional) and all lenders are required to follow the same Act’s laws in terms of lending practices and appraisals.

In addition, the VA has Minimum Property Requirements that must be met to ensure the safety and health of military homebuyers. If the home does not meet the MPRs, it cannot be purchased with VA financing.

“Those are the only legitimate reasons the home shouldn’t pass a VA appraisal, not because of someone’s race, religion, or sexual orientation,” says Stacey Daniels, Executive Vice President and Chief Operating Officer for AAFMAA Mortgage Services (AMS). AMS, which is approved for non-supervised underwriting, regularly contracts appraisal professionals licensed and certified by the state where the property is located for VA appraisals.

But the VA is taking action to detect discriminatory appraisals, recently moving to enhance oversight procedures of appraisals for VA Loans. Starting in December 2022, the agency has been randomly reviewing reports submitted to the home loan guaranty program using an enhanced technology scanning software.

If the initial review indicates a potential discriminatory bias, the VA flags the data for an escalated review. Should VA’s escalated review confirm a discriminatory bias, the appraiser will be subject to removal and VA will refer the case to enforcement agencies for investigation.

Related: What Is a VA Appraisal (and Who Pays for It?)

How to Challenge a VA Appraisal

If the buyer (or seller) feels their VA appraisal comes in too low, there is a complaint process called a “Reconsideration of Value.”

This process is not identical to what happens with appraisal challenges for other types of financing, notes Daniels. There is not going to be a new appraisal or different appraiser. Rather you’re able to make a request in writing to present new, possibly overlooked, facts such as:

  • Measuring errors in square footage, age, condition of the home or upgrades that may affect the current market value.
  • Sales prices of comparable homes (comps) in the area that were not used for the initial appraisal and are closer to your home’s age, etc.

“For a positive outcome, the buyer or seller needs to present relevant supporting documentation that will be provided to the original appraiser for reconsideration,” says Daniels.

Experiencing Appraisal Discrimination? We're Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!