An African American couple have filed a fair housing lawsuit against a real estate appraiser alleging fair housing and civil rights violations after another appraiser valued their home for nearly half a million dollars more after the couple removed any indication of their race and had a white friend pose as the owner of the house.
According to the complaint, Tenisha Tate-Austin and Paul Austin, bought a home — 20 Pacheco Street in Sausalito, California — for $550,000 in December 2016. The home is located in an unincorporated community of affluent Marin County called Marin City. According to the complaint, Marin City grew into a racially diverse community during World War II, when shipbuilding jobs were plentiful. After the war, when those jobs largely disappeared, many white residents moved away, helped by Federal Housing Administration (FHA) loans unavailable to black residents.
At the time the Austins bought their home in December 2016, an appraisal estimated the market value of the four-bedroom, two-bathroom, 1,248 square foot house to be $575,500. The appraisal report noted that the home had not been updated in 15 years. The Austins moved into the home with their two children and over the next two years completely remodeled the house using licensed contractors, upgrading the kitchen and bathrooms and removing a wall to create one larger primary bedroom. In 2018, when the Austins refinanced their mortgage, an appraisal put the value of their home at $864,000.
After that, the Austins added a new foundation and a retaining wall to create an additional 270 square feet of living space on the ground level and added a deck and a gas fireplace, extending their living area upstairs by eight feet. They also obtained permits and began construction of a 450-square foot accessory dwelling unit (ADU) with a kitchen and bathroom and views of the Bay. In March 2019, the Austins applied to refinance again and the appraisal report indicated the market value of the property had risen to $1.45 million.
In January 2020, the couple sought a mortgage refinance again due to low interest rates and to obtain additional funding to complete the basement conversion and ADU. Active, licensed appraiser Janette Miller of Miller & Perotti Real Estate Appraisals Inc., through appraisal management company AMC Links LLC, conducted the appraisal while the homeowner, Paul Austin, was present, according to the complaint. The Austins had African-themed art on their walls and family photos around the house. Miller, who is white, concluded that the current market value of the Austins’ home was $995,000.
“In preparing her report and estimating the value of the Austins’ house, plaintiffs contend that Miller took into account the Austins’ race – Black – and the current and historical racial demographics of the house’s location in the unincorporated area known as Marin City,” the complaint said.
“Within days, a different appraiser inspected the Austins’ house. But this time, the Austins’ erased any evidence of their racial identities inside their house, even asking a white friend to pose as the homeowner during the inspection. This different appraiser arrived at a value of $1,482,500 – nearly half a million dollars higher than Miller’s estimated value.
“Race was a motivating factor in Miller’s unreasonably low valuation of the Austins’ house, in violation of the Fair Housing Act and related federal and state laws.”
The complaint alleged that Miller’s appraisal relied primarily on comparable sales within Marin City, where in the past five years there had been no more than four sales annually.
Due to housing discrimination, racially-restrictive covenants, redlining, denial of access to government-backed financing, and other forms of discrimination, African Americans were unable to move and became the largest demographic group in Marin City, the complaint claims. In recent years, Marin City has become more diverse, but African Americans are still about 36 percent of the population. Meanwhile, the population of Sausalito, with which Marin City shares a school district, is 92.2 percent white and 0.9 percent black (excluding unincorporated areas like Marin City). In Marin County overall, 85.3 percent of the population is white and 2.8 percent is black.
“Using Marin City sales as the primary source of comps is evidence of racial bias – i.e., that the appraiser believes that Marin City’s demographics make it so much less ‘desirable’ than surrounding areas that property in those areas cannot be used as comps,” the complaint added. “A competent, unbiased appraisal must look to additional areas outside of Marin City for relevant comps.”
Three of the six comparable sales Miller used were located in Marin City, one of which was a foreclosure that sold two years before and another that was an attached dwelling in a planned development. Of the remaining comps, two were located in Mill Valley and one in Sausalito — and Miller adjusted downward the price per square foot of homes in Marin City in comparison to those comps, according to the complaint.
“Miller opined that she looked at several years of data and determined that houses in Marin City were worth ‘conservatively’ 25 percent less per square foot than those in ‘surrounding areas,’” the complaint said.
“This adjustment was both statistically unsound and based on the racial demographics of Marin City. There are not enough property sales in Marin City to assert that there is any statistical average ‘price per square foot’ for houses in Marin City as compared with Mill Valley or Sausalito. In addition, price per square foot varies based on many factors, including quality of construction and amenities.”
Miller also stated in her report that Marin City has a ‘distinct marketability which differs from the surrounding areas’ — a phrase the complaint said is “coded based on race.”
“Embedded in this statement are Miller’s assumptions that Marin City is predominantly non-white; that white homebuyers would not be willing to consider purchasing a house located in Marin City; and, thus, Marin City is not comparable in marketability to surrounding areas,” the complaint said.
Miller’s report also used dated market statistics for Marin City leading up to and ending in 2008, during the Great Recession, when — in part due to discrimination — majority non-white communities like Marin City saw a disproportionately higher rate of foreclosures, the complaint alleged. At the same time, she used more recent stats for Sausalito next door.
“[C]onsidering ‘market trends’ from 2008 disproportionately and inappropriately devalues property in Marin City, because more than 10 years have passed and the market value for single-family housing in the area has rebounded entirely,” the complaint said.
The complaint names not only Miller and the firm she owns as defendants, but also AMC Links.
After the Austins’ mortgage broker told them they could not obtain refinancing at favorable terms because of Miller’s appraisal, the Austins had their broker contact AMC Links and requested a second appraisal by a different appraiser.
That appraiser came from a different company and chose eight properties as comps, two of which were located in Marin City, according to the complaint. The other six were located close by in Sausalito.
“All eight properties were available to use as comps when Miller prepared her appraisal report three weeks earlier,” the complaint said. “None of the same comps were used in the two reports.
“Although the Austins refinanced their mortgage based on the March 2020 appraisal, they were not able to refinance on the favorable terms that had been available one month before.”
The complaint names Miller and AMC Links as defendants; seeks compensatory damages, statutory damages and punitive damages; and alleges violations of the Fair Housing Act, the California Fair Employment and Housing Act, the Civil Rights Act of 1866, the Unruh Civil Rights Act, California’s unfair competition law, and negligent misrepresentation.
Miller, Miller & Perotti, and Rod Olsen, COO of AMC Links, did not respond to requests for comment.