PHILADELPHIA (WPVI) -- Janine and Corey Ricks have decorated their Christmas tree, hung stockings in their fireplace and set a calendar countdown to Santa's arrival on their mantel. They're looking forward to hosting family for the holidays in their new house in New Castle, Delaware, where they live with their two children. But their path to this home wasn't easy: It was hindered and nearly blocked by an under-appraisal.
"We're definitely blessed to be here now, because we fought for this place," Corey said. "This was just the benefit of our hard work and the things that we went through."
The appraisal the Ricks received for their previous home, in the Philadelphia suburb of Darby, was more than $40,000, or about 35%, below their asking price. They had already found an eager buyer, but the under-appraisal thwarted the sale, since the buyer couldn't receive the loan they needed.
After planning their move to Delaware, the Ricks were left without a way to afford their new house.
"We were assuming we weren't going to be able to purchase this home," Janine said, "even days before we were actually going to sit down and sign."
With some help from a family member and flexibility from the owner, the Ricks were able to buy the Delaware house. But they still have been unable to sell their Darby home.
The under-appraisal has taken a large toll on their family, both financially and emotionally.
The Ricks are one of many local families who have been "lowballed" in recent years: From 2018 to 2020, at least 18,922 homes sold in Pennsylvania were appraised below market value, according to a 6abc analysis of Federal Housing Finance Agency data. Of those under-appraisals, over 1,700 were in Philadelphia.
These under-appraisals were much more common in majority-minority neighborhoods, like where the Ricks lived in Darby.
Across the Philadelphia-Camden-Wilmington metro area, more than one in 10 homes sold in majority-Black neighborhoods were under-appraised. These properties were 1.7 times as likely to be under-appraised as those sold in majority-white neighborhoods. Homes in majority-Latino neighborhoods were more than twice as likely to be under-appraised as those in majority-white neighborhoods, the 6abc analysis found.
"For the majority of working-class Philadelphians, the purchase of your home is the most valuable asset that you will ever have in your life," said former Philadelphia Councilwoman Cherelle Parker. "Black and brown lives must matter when it comes to economic self-sufficiency and building wealth."
"We felt like we were stuck"
The Ricks bought their first home in 2006, soon after graduating from West Chester University and getting married, and right before the housing bubble burst.
It was a three-bedroom rowhouse in a quiet area close to their work and family, and they purchased it for about $80,000.
As the first homeowners among their friends, the Ricks became frequent hosts. They held weekly Grey's Anatomy watch parties, proud to show off their house -- although they still thought of it as a "starter home," which they planned to sell five years down the line. Then the market crashed, and their property value was cut in half.
"We felt like we were stuck," Corey said.
The Ricks' "starter home" became their long-term family home, where they raised their daughter, Maia, and son, Cameron. As five years turned into 15 years, they decided to embrace their life in Darby with an attitude of "We're just going to make this even more of a home than it has ever been," Janine said.
Calling Darby home was easy with the "community-based" feel of their neighborhood, the Ricks added. Like the Ricks, almost all of their neighbors were Black. Today, 89% of the neighborhood's residents are Black, according to Census data. The average household has two to three residents, and a quarter of households are occupied by married couples.
But their neighborhood wasn't as attractive as the Ricks might have liked. Most of their neighbors were renters, and many didn't take care of their properties.
"Our house stuck out like a sore thumb, because it was maintained," Corey said.
The neighborhood was considered low-income, Janine noted. Today, the typical household income in the Ricks' Darby neighborhood is about $33,000, and more than one third of residents live below the poverty line.
Still, the Ricks enjoyed their home and the surrounding community.
"We learned a lot from living in that house, and a lot about life," Corey said.
They made many improvements to the rowhouse, laying new hardwood floors, painting the exterior and all of the rooms, replacing kitchen appliances, upgrading bathroom fixtures and refreshing the heating and electrical systems.
The Ricks watched the value of their home slowly creep back up. Then, in 2020, they saw an opportunity: The pandemic had made the housing market hot, driving up values. Their "starter home" was finally ready to sell.
Corey and Janine did their own research before putting their house on the market. They looked at similar properties -- three-bedroom, one-bathroom rowhomes -- within a one-mile radius of theirs. Then they spoke with a realtor, who did her own due diligence. Together they came up with an asking price of $124,900. They quickly found a buyer who agreed the price was fair and was eager to purchase their home.
The Ricks also found a new home in New Castle, Delaware, and a charter school nearby where their son Cameron would start seventh grade. They had a plan: Sell their Darby home and move to New Castle about a month later, filling the gap with a hotel stay. The next step was to get their home appraised, which they expected to go as smoothly as the rest of the process had gone.
Corey and Janine were working from home and Cameron was attending school virtually at the time, so they didn't have anywhere to go during the appraisal. They were home when the appraiser came to evaluate the house, and they talked to him for a little while. His body language seemed odd to Corey.
"He seemed a little uncomfortable," Corey said. "It felt like he's never been in a city with rowhomes with predominantly African American folks and minorities there."
Still, the Ricks didn't expect anything out of the ordinary from their appraisal. So when it came in at just over $80,000, they were stunned.
"It was a shock," Corey said. "That's the price that we paid for our house 14 years ago. So you mean to tell me, that's it?"
The Ricks had just seen a home down the street from theirs sold for $130,000, Corey added. Their appraisal didn't seem to make any sense.
"Everyone was just blown away: our realtor, the buying agent," he said.
Advised by their buying and selling agents, the Ricks requested a reappraisal. But the lender, Trident Mortgage Company, refused.
The lowballed evaluation sent the whole process into a tailspin: Corey and Janine lost their buyer, the sale fell through and it looked like the Ricks wouldn't be able to move -- yet again. But this time, they couldn't chalk it up to a bad economy.
"We were just very dejected by everything," Janine said, "just a couple days ago being so optimistic about really starting a new point in our life, and then seeing everything slip through our fingers."
"It was a heavy blow," Corey agreed.
Bigger Than One Home
While the thought of racial discrimination had crept into their minds, Janine and Corey initially weren't sure that was actually what had happened to them. But when they considered the size of the discrepancy -- a third of their asking price and half of the appraised value -- and met resistance from the lender when all parties asked them to reevaluate, the Ricks questioned whether they had been lowballed because they and their neighbors were Black.
Then, earlier this year, Trident was exposed for redlining majority-minority neighborhoods in the greater Philadelphia area. The Consumer Financial Protection Bureau and Department of Justice ordered the lender to pay $22 million for its discriminatory practices. The Ricks read about the resolution and recognized their experience in the claims.
"It really clued us in to, 'Okay, maybe this was a lot bigger than we initially thought,'" Janine said. The impact of the under-appraisal also reached beyond the Ricks, she added: "A higher home value in a neighborhood like Darby -- It's not just good for us, it's good for the community."
"You're kept down because of the color of your skin and assumptions are made, because of where you live," Corey said, adding that companies like Trident want to "keep folks as consumers and not producers, not dreamers."
The Ricks still own their home in Darby and now finance it through renters. Their original buyer was unable to purchase a home as she had planned, Janine said. With one lowballed appraisal, two families lost an opportunity to build wealth.
"It's one of the core reasons why we have the wealth gap in this country," said Angela McIver, Executive Director of the Fair Housing Rights Center in Southeastern Pennsylvania. "Homeownership, and then the amount of finances you're able to attach to your home -- what you can get out of it when it's time to sell."
The Ricks knew the importance of buying a home early on, and they had hoped their purchase in Darby would lay a financial foundation for their children.
"We can't create generational wealth for them without these kinds of bases and assets to be able to build on," Janine said. "Because of what we went through, we realized that we kind of were robbed of that."
They also know that the issue of barriers to wealth building is larger than just their family.
"That has impacted African American communities as a whole, which keeps them in this hole, where you're not able to continue to build the community, to make it a greater space for the future generations," Janine added. "Moving here made that all the more evident that we didn't have that, and how important it is to make sure that we continue to create that for not just our children, but our children's children, and our friends and our family."
Little Diversity in the Appraisal Industry
Carlo Batts, Principal Appraiser at Rittenhouse Appraisals in Philadelphia, has seen many Black families in the area lose out on economic opportunities. He estimates appraisals in predominantly Black areas run between 20% and 25% below the value of the homes.
Appraisals at least two percent below the home's contract price are considered severe, according to the Federal National Mortgage Association. The 6abc analysis found even wider racial disparities among under-appraisals that large: In the Philadelphia-Camden-Wilmington metro area, homes sold in predominantly Black neighborhoods were nearly five times as likely as those sold in mostly white neighborhoods to be lowballed by at least two percent. Homes in majority-Latino neighborhoods were eight times as likely to be severely under-appraised.
Batts cites the lack of diversity in the appraisal industry as one of the main reasons for these gaps: "Within the city of Philadelphia, you have limited appraisers, and most of the appraisers come from Bucks County or more from counties that are not within the surrounding counties and not from within the city," he said.
These outsiders are largely white and may be unfamiliar with the texture and context of majority-minority neighborhoods, he added, leading them to undervalue homes in those areas.
According to former Councilwoman Parker, it's extremely important that appraisers are "knowledgeable about the diversity of our city, the cultural diversity, cultural competencies to understand neighborhoods and commercial corridors."
Across Pennsylvania, an estimated 94% of appraisers are white, compared to just 74% of the population, according to a 6abc analysis of Census Bureau survey data. In the Philadelphia-Camden-Wilmington metro area, Black people make up 19% of the population, but only an estimated six percent of appraisers. Batts is one of very few Black appraisers in Philadelphia.
"When they came up with the plan for how you become a designated or a licensed appraiser, they did not take diversity into consideration," Batts said. "You have to apprentice under someone to become a licensed appraiser, and what has happened is that the industry is dominated by mom-and-pop small operations."
These small licensing firms have created a barrier to entry into the industry for people of color, adding to an existing lack of knowledge and education about the appraisal industry in community spaces like Historically Black Colleges and Universities, he explained.
"We need more Black appraisers, we need more Asian appraisers, we need more Hispanic appraisers," Batts said. "We need to figure out a different structure, to change the apprenticeship model and to create more opportunities for people to practice as an appraiser."
A Path Forward
In Philadelphia, Batts and McIver are part of an effort to address the root causes of appraisal disparities. In June 2021, then Councilwoman Parker created the Philadelphia Home Appraisal Bias Task Force, a team of real estate professionals, housing rights advocates and other experts on housing and discrimination.
"We really wanted to get to the heart of what does Philadelphia look like in this area of appraisals," Parker said, as well as identify ways for the city, state and federal governments to close the gaps.
In a report published in July 2022, the Task Force exposed the lack of diversity and localized knowledge among appraisers, insufficient education on fair housing and a lack of transparency in the appraisal industry. It made dozens of recommendations, including collecting data on appraisers and appraisals to investigate appraisal practices, educating homebuyers and homeowners on the valuation process and educating appraisers on city neighborhoods and redevelopment efforts, and partnering with colleges and other institutions to promote the appraisal profession and create accessible pathways to careers in the field.
"We should be doing everything we can to remove every barrier to entry to the real estate industry," Parker said.
The Ricks are doing their part to close appraisal gaps by spreading the word among their communities about how to avoid being lowballed. They've shared their cautionary tale with friends looking to sell a home and made sure they knew what not to do: Don't be at home during the appraisal, they've warned, and be sure to remove any personal items such as family photos or cultural decorations.
Still, knowing they have to take these steps to hold onto their wealth is painful to the Ricks.
"Your home is a part of you," Corey said. "Now I have to take down a piece of me in order to sell this property."
People who face discrimination often internalize this devaluation, McIver noted: "Instead of people always looking at, 'Hey, something is happening to me,' sometimes they think, 'Hey, maybe the flaw is me,' because they've been told that for so long."
McIver recommends that current and aspiring homeowners take advantage of housing counseling, which is funded by the Department of Housing and Urban Development, to learn about the appraisal process and what to expect.
"If you get an evaluation and you don't think it's what it should be, you should dig deeper," said McIver. At that point, she suggests people turn to a fair housing organization like hers to investigate potential discrimination.
The Ricks have not taken action to have their case investigated yet, but they are now considering possible options. Their experience has changed the way they see homebuying and homeownership in America.
"We're always sold on the American dream," Janine said. "Owning a home is a large part of that dream. And everyone should be able to experience it in an honest and fulfilling way, not something that becomes dejecting and may end your story."
"It makes you question," Corey added, "Who is the American Dream for?"
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