A Freddie Mac study, released in 2021, indicated that the average distance between the subject and comparable properties is _______ in a Black or Latino tract, as compared to a White tract.

A Freddie Mac study, released in 2021, indicated that the average distance between the subject and comparable properties is _______ in a Black or Latino tract, as compared to a White tract.

• A. Substantially larger
• B. Substantially smaller
• C. About the same
• D. Not specified

Answer: (B)

The main idea is how the geographic scope of data used for comparables reveals potential bias in valuations. The Freddie Mac study found that in Black or Latino tracts, the average distance from the subject property to used comparable sales is substantially smaller than in White tracts. This means appraisers tend to rely on nearby comps in minority neighborhoods more than in White neighborhoods, which can reflect data limitations or risk-avoidance behavior. Using very close comparables can affect the valuation by limiting the market view to a narrow area and may contribute to fairness concerns if broader market trends aren’t adequately captured. The other options don’t fit because the study did not report larger distances, about-the-same distances, or no specification.

The main idea is how the geographic scope of data used for comparables reveals potential bias in valuations. The Freddie Mac study found that in Black or Latino tracts, the average distance from the subject property to used comparable sales is substantially smaller than in White tracts. This means appraisers tend to rely on nearby comps in minority neighborhoods more than in White neighborhoods, which can reflect data limitations or risk-avoidance behavior. Using very close comparables can affect the valuation by limiting the market view to a narrow area and may contribute to fairness concerns if broader market trends aren’t adequately captured. The other options don’t fit because the study did not report larger distances, about-the-same distances, or no specification.