Veros Says It Study Shows AVM Eliminates Racial Bias
Reinforces previous conclusion from its first report that its AVM did not display racial bias.
- The proportion of properties undervalued by more than 15% had no correlation with the proportion of Black or Hispanic populations in a neighborhood.
- Findings suggest that bias tested AVMs can be leveraged to provide a quality control check to identify potential undervaluation related to bias.
- Company says it is an innovative solution to appropriately flag any potential instances of bias and ensure fair home valuations.
Veros Real Estate Solutions, a company that provides risk management and valuation services, released new research that finds no evidence of racial bias in its VeroVALUE Automated Valuation Model (AVM). Veros says research should help lenders, appraisers, and appraisal management companies avoid compliance issues and lawsuits from wronged borrowers.
An in-depth analysis of the VeroVALUE AVM was conducted across five housing markets: Chicago, Atlanta, Houston, Los Angeles and Philadelphia, which were selected because of their diverse populations. By studying a wide range of cities, Veros reinforced the conclusion from its first report that its AVM did not display racial bias.
The study analyzed neighborhood racial composition to determine if a correlation existed between the percentage of Black, Hispanic, Asian and white populations and the number of properties in the area that were undervalued or overvalued by more than 15%.
The study showed that the proportion of properties undervalued by more than 15% had no correlation with the proportion of Black or Hispanic populations in a neighborhood.
The findings suggest that bias tested AVMs can be leveraged to provide a quality control check to identify potential undervaluation related to bias. This can serve as an innovative solution in the housing industry to appropriately flag any potential instances of bias and ensure fair home valuations.
“It is crucial to utilize professional-grade AVMs that can help identify potential racial bias in home valuations and to flag concerns of potential undervaluation of minority-owned properties,” said Veros Chief Economist Eric Fox. “Proven solutions like VeroVALUE give the housing market a precise, accurate and non-biased solution that is built on quality data.”
Veros believes that thorough research to ensure the absence of human or algorithmic bias across all property valuation tools and services is vitally important for the housing industry. A webinar will be conducted on Nov. 16, entitled "Combating Racial Bias In The Mortgage Industry Through Data, Technology and Diversity," will further explore the insights from this research study as well as other tools and solutions that drive transparency, diversity and positive change in the home valuation process.