6.1 Key Advisory Opinions on Fair Housing & Bias

6.1 Key Advisory Opinions on Fair Housing & Bias

Understanding the regulatory status of Advisory Opinions and the strict legal prohibitions against discrimination and bias in appraisal practice is critical for passing the USPAP exam. The Appraisal Standards Board (ASB) regularly issues guidance to clarify how appraisal standards apply to evolving societal standards, fair housing laws, and civil rights requirements.

---

Status and Legal Authority of Advisory Opinions in USPAP

A foundational concept tested heavily on the USPAP exam is the exact regulatory status of Advisory Opinions (AOs) within the broader hierarchy of USPAP documentation.

Guidance vs. Mandatory Standards

• Advisory Opinions are NOT part of USPAP standards rules. They are published by the ASB solely to provide advice and guidance illustrating the applicability of USPAP to specific appraisal situations and offering solutions to common appraisal problems.
• AOs do NOT establish new standards, enforce rules, or amend existing rules.
• An appraiser cannot be cited for violating an Advisory Opinion directly. Instead, any failure to adhere to the principle discussed in an AO constitutes a violation of the underlying mandatory USPAP Rule (such as the ETHICS RULE or COMPETENCY RULE) or specific Standards Rules (e.g., Standard 1 or Standard 2).

---

Fair Housing Laws & Appraiser Responsibilities: Advisory Opinion 39 (AO-39)

Advisory Opinion 39 (AO-39) addresses the appraiser's legal and ethical duties under federal, state, and local anti-discrimination laws. Appraisers must navigate two primary federal statutes when appraising real property associated with residential transactions:

1. The Fair Housing Act of 1968 (Title VIII of the Civil Rights Act of 1968, as amended): Prohibits discrimination in housing-related transactions based on race, color, religion, national origin, sex (including sexual orientation and gender identity), handicap/disability, and familial status.
2. The Equal Credit Opportunity Act (ECOA): Prohibits creditors and appraisers from discriminating against credit applicants based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

Core Appraiser Obligations under AO-39

• Prohibition on Protected Characteristics: Appraisers must never base a value conclusion, comparable selection, or market analysis on any protected characteristic of the property owners, prospective buyers, sellers, or occupants of the subject property or surrounding neighborhood.
• Affirmative Duty of Compliance: Appraisers have a professional obligation to be knowledgeable about applicable local, state, and federal fair housing laws. Ignorance of civil rights legislation is explicitly rejected as a defense under the COMPETENCY RULE.
• Prohibition on Discriminatory Inferences: An appraiser cannot adjust property values based on demographic shifts or the presence of protected classes within a market area.

---

Eliminating Residential Discrimination and Valuation Bias: Advisory Opinion 40 (AO-40)

Advisory Opinion 40 (AO-40) offers detailed operational guidance on eliminating overt, subtle, and implicit bias from residential valuation reports, specifically targeting neighborhood analysis, comparable selection, and valuation conclusions.

Subjective vs. Objective Neighborhood Descriptions

USPAP requires that neighborhood analyses rely strictly on objective, verifiable, physical, legal, and economic data. Appraisers must avoid subjective, vague, or stereotyped terminology that could serve as a proxy for demographic bias.

Bias Elimination in Comparable Selection & Adjustments

• Comparable Selection Criteria: Comparable properties must be selected solely based on their physical features (square footage, room count, age, condition), functional utility, legal permissions (zoning), and locational market characteristics.
• Prohibition on Demographic Filters: Excluding comparable sales based on the racial or ethnic composition of a subdivision or census tract is an illegal practice that violates USPAP.
• Supported Adjustments: Every value adjustment applied in the sales comparison approach must be anchored by empirical market evidence—such as paired sales analysis, market extraction, or statistical regression—rather than personal assumptions or unsubstantiated generalizations.

---

The 2024-2026 USPAP Nondiscrimination Rule Update

In the 2024-2026 edition of USPAP, the Appraisal Standards Board executed a major structural update by establishing a standalone Nondiscrimination Rule directly within the mandatory ETHICS RULE.

Key Elements of the Nondiscrimination Rule

1. Explicit Legal Compliance: Appraisers are prohibited from illegally discriminating against any member of a protected class under applicable federal, state, or local fair housing and civil rights laws.
2. Prohibition on Using Protected Characteristics: An appraiser must not use or rely upon protected characteristics when developing or communicating any appraisal or appraisal review assignment.
3. Universal Application across Disciplines: Unlike specific fair housing statutes that target residential mortgage lending, the USPAP Nondiscrimination Rule applies universally across all appraisal disciplines, including real property, personal property, mass appraisal, and business valuation.

By integrating this rule directly into the ETHICS RULE, the ASB ensured that any act of illegal discrimination or valuation bias is a direct violation of USPAP's core ethical obligations.