There’s a dirty little game that appraisers play when it comes to placing a value on real estate. It’s called the “Zip Code Game.” We’ve all heard the cliché, “It’s all about location, location, location,” but there should be some exceptions to this rule. See, qualified appraisers create a report based on an in-person inspection which uses the comps of similar properties, the market trends, and the aspects of the home to determine its value. But notice that the FIRST evaluation marker are the comps of similar properties. This measure alone provides skewed results. For instance, why should a small house, with poor maintenance built 60 years ago, cost more than a new, larger home in a different zip code? And why should a beautiful new subdivision with amenities and good schools be valued less because it’s on the “wrong” side of town? The chart below consists of zip codes in Greensboro, NC. Notice the trends with the median home value, versus the median home income and white population. Normally, I would say that the median home value aligns with the median income but take a look at zip code 27406. Although the median income is MORE, the value of the homes are LESS than 27403. The only obvious difference is the percentage of whites.
Zip Code Median Home Value Median Income % White Pop % Married Household
27401 $99,600 $26,460 19.6% 19%
27405 $103,600 $28,677 29.7% 33%
27406 $124,100 $37,548 33.5% 38%
27403 $164,800 $36,664 66.7% 29%
27408 $211,600 $60,938 86.5% 48%
Here are two examples below. The home at 2914 Martinsville Road in Greensboro is a “fix and flip.” It has 4 bedrooms with 3 baths and roughly 2000 square feet. The house was built in 1963 and the surrounding homes are dated and unkept. Although the upgrades are nice, this house is not worth the asking price of $359,000.
Compare it to the home at 2905 Woodbluff Drive in Greensboro. This 4 bedroom, 3 bath home was built in 2008. It has 2500 square feet with a 2-car garage and a privacy fence. This home is in a safe community with amenities such as a lake for fishing and a clubhouse for events. However, the asking price for this home is $304,900 which is $54,100 less than the “fix and flip” on Martinsville Road.
On paper, this is a no brainer. Even with an on-site visit, Woodbluff is better, but the difference lies with the “Zip Code!” 2914 Martinsville is located in 27408, while 2905 Woodbluff is located in 27406.
And this is one of the reasons why I established Building Blox LLC. To combat the irregularities within the housing market that no one seems to address. Until congress cracks down on the unjust practices of the appraisal industry, homes particularly in the African American community will be devalued.
We’re countering these practices by building “Equitable Homes” in working class communities. Let me explain what this means and how it affects homeowners. For years, blacks were subjected to being the “Last hired, First fired” on their jobs. This leads to short sales and foreclosures within the black community. Unfortunately, when the neighboring homeowners seek to sell or refinance their property, appraisers will compare its value to the homes that were recently foreclosed and sold at a low price. This drives the value of the community down, regardless of the condition of the home for sale. Building Blox is driving up the price by designing homes with distinct details and timeless features. Our modest homes include hardwood floors, granite countertops, soft close cabinets, and a custom backsplash. We’ve also included a fireplace as an added touch for our quaint yet stylish homes. Our homes sell for top dollar because they’re worth it. But this approach also helps the neighbors when appraisers seek comparative prices in the neighborhood. This ensures that the neighborhood receives a fair and competitive price for their home. And this is also why we decided to build “Equitable Homes” instead of cheap affordable houses. So, as you can see, our strategy is to not only improve the aesthetics of the community, but to ensure the neighbors receive a fair and equitable price for their home as well.
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