Real Estate Appraisal

Until the 1920s, determining the value of a piece of property was an imprecise process, drawing on a few established principles and much guesswork. Then, economists developed new ways to calculate value. Business leaders founded two professional societies to train real estate appraisers, and sought to make appraisers’ work more accepted. The HOLC and FHA required professional appraisal of properties for their mortgages, supporting and institutionalizing the new methods as the standard across the country.
Three values were blended together: sales of comparable properties, the calculated income from rental, and the cost to rebuild the property. One factor in setting the value was neighborhood quality, which incorporated segregationist concerns about “inharmonious races” in the area. The FHA published a manual of their standards to guide local lenders that suggested, among other things, “Schools should be appropriate to the needs of the new community and they should not be attended in large numbers by inharmonious racial groups.”