The Facts

Thomas and Denise Jennings, a couple living in Phoenix, AZ, were keen to take advantage of low interest rates by refinancing their mortgage. After spending over $35,000 on renovations, coupled with home prices in their area increasing by 40% over the past five years, they believed their house was now worth much more than the $400,000 they had paid for it.

However, after welcoming appraisal firm, XYZ Appraisals (XYZ), into their home, they valued it at only $425,000. As a result, mortgage lender, Wagner Creek Lenders (Wagner Creek), denied them a refinance loan.

Thomas and Denise, shocked by the outcome, feared the worst. They believed the result of the appraisal was down to the fact that they are black. A few months later, they applied for another refinance loan but this time, before the appraisal, removed family photos and other items from their home, and had a white man - Thomas' friend - stand in for them. The second appraiser valued their home at $625,000.

Thomas and Denise proceeded by suing Wagner Creek and XYZ.

The Result

When Thomas and Denise originally applied to refinance their mortgage, Wagner Creek approved a loan as they believed their home was likely to be worth at least $525,000 or more. Wagner Creek hired XYZ to conduct the appraisal but because they valued the home at just $25,000 more than what Thomas and Denise had paid, they rejected their application.

Thomas and Denise criticized the way XYZ came up with their appraisal. They believed that the appraiser intentionally picked low value nearby homes as 'market comps', ignoring higher value homes that were more accurate and equal comparisons.

Litigation is still pending against Wagner Creek and XYZ. The Jennings' initial demand was for the $200,000 difference in value and have asked the court to determine additional compensatory damages. In addition, the Jennings are looking into being the lead plaintiffs in a class action lawsuit.

Risk Factors

Risk Factor #1

Under the current Uniform Standards of Professional Appraisal Practice (USPAP), as adapted by Congress in 1989 and revised in 2020, appraisers must meet ethical and performance standards for fairness in the appraisal process. Appraisers must be impartial and unbiased.  

Risk Factor #2

Appraisers should be diligent in choosing comparable properties. "Comparables" are recently sold or listed properties that have similar utility, quality, age and amenities as the subject property, and are located in the subject property's market area. The appraiser should also analyze and compare characteristics that include the living area of the home, land area, style, age, quality of construction, number of bedrooms, presence or absence of a garage etc. to determine value. A credible appraisal must effectively communicate the data and analysis required to support the opinion of value. 

Risk Factor #3

Appraiser independence is a critical element to protect the client and intended users, and to enhance the public trust that appraisals contain credible opinions of value. Furthermore, both Federal and State law requires appraiser independence. 

Risk Factor #4

A credible appraisal include:

• A clear, accurate description of the subject property.
• Sales that are the most recent and most comparable.
• Comments that explain important issues in the appraisal.
• An opinion of value supported by the analysis of the comparable sales.