Murphy administration launches initiative to battle appraisal discrimination

State officials unveiled a new initiative Friday to combat discrimination in home appraisals after a bill that would have set new penalties for the practice stalled in the Assembly during the legislative session that ended Tuesday.

The state’s civil rights division said appraisers that devalue a home because of a homeowner’s protected characteristics — like race, gender, or religion — could be liable under the New Jersey Law Against Discrimination even absent a new law setting discrete penalties for faulty valuations.

“Discriminatory practices in home appraisals violate our civil rights laws, and we are committed to ensuring that all entities involved in the home appraisal process, including appraisers, lenders, and appraisal management companies, comply with their legal obligations,” said Sundeep Iyer, the division’s director.

In addition to civil penalties under the anti-discrimination law, appraisers who discriminate could face sanctions from the New Jersey Real Estate Appraisers Board, which issues appraisal licenses. They could also face hefty financial penalties under the New Jersey Fraud Act, the division said in new guidance released Friday.

As part of its enforcement, the division has created a new internal task force to investigate allegations of discrimination in the appraisal process. The claims it investigates will also be shared with the civil rights division.

“Although we have some of the strongest anti-discrimination protections in the nation, bias continues to affect the real estate industry. That is unacceptable, and in New Jersey it is unlawful,” said Attorney General Matt Platkin, whose office oversees the division. “We are committed to putting an end to discriminatory practices that create barriers to homeownership, building generational wealth, and maintaining stable communities.”

The stalled bill won Senate approval last month by a 22-11 vote — bills in the Senate need 21 yes votes to pass — and would have levied steep, escalating fines on appraisers who discriminate. It would have charged them $10,000 on a first offense, $25,000 on a second, and $50,000 on a third.

The legislation would also have required violators to make restitution equal to the appraisal’s cost and attend an anti-bias seminar. Repeat violators would face a one-month suspension, and those who violated a third time would see their appraisal license fully revoked.

In the Senate, Republican members said the bill’s steep penalties would do more to deter appraisals than it would discrimination. They said the bill could leave traditionally disadvantaged communities without any appraisals at all, and those concerns extend to Friday’s announcement.

“Why would an appraiser want to be subject to a problem by doing an appraisal? Residential appraisals — it’s volume. You’re not making a ton of money,” said Sen. Bob Singer (R-Ocean), a banker by trade. “Why would you want to take the chance of doing that?

Other provisions of the civil rights division’s new initiative will include anti-bias training for appraisers and members of the Real Estate Appraisers Board, as well as a new initiative to examine whether new training courses could help diversify the state’s pool of appraisers.

The civil rights and consumer affairs divisions will also hold training sessions to help inform members of the public about discriminatory appraisals.

The move is a bid to eliminate racial disparities in home appraisals. Analysis released last January by the Brookings Institution found homes in majority-Black neighborhoods were nearly twice as likely to be appraised below their contract price than were homes in majority-white neighborhoods.

“Home ownership is a key driver of wealth, and with a staggering $300,000 racial wealth gap – one of the highest in the country – New Jersey should be vigilant in ensuring that the appraisal process is fair,” said Laura Sullivan, director of the New Jersey Institute for Justice’s economic justice program.

Singer said the initiative announced Friday should flow through legislative committees whose mandate covers financial institutions like banks and other regulated industries, and should not be enacted through executive action.

“We want to do laws to protect consumers — I believe in that,” Singer said. “But I also don’t want to discourage business people from doing business in our state.”