How can neighborhood demographic data create bias in valuations?

• A. Demographic data may be ignored in all adjustments.
• B. Demographic data should always drive adjustments.
• C. Demographic data may correlate with values due to past discrimination; appraisers must separate market factors from demographics when making adjustments.
• D. Demographic data are irrelevant to valuations.

Answer: (C)

Demonstrating bias in valuations happens when demographic data, which can reflect historical discrimination, influences how value is adjusted. If an appraiser uses neighborhood demographics as a factor in adjustments, the value can mirror past inequities instead of what buyers are presently willing to pay for a property. The right approach is to separate market factors from demographics: rely on objective market data like recent comparable sales, property features, condition, and actual demand, and adjust only for factors that truly affect value. Demographics may correlate with prices, but that correlation often results from structural factors shaped by discrimination, not from the property's intrinsic value. Therefore, adjustments should not be based on the demographic makeup of a neighborhood, and appraisers must isolate market-based influences to comply with fair housing principles.