Jonathan J Miller, Columnist

Real-Estate Appraisals Are Bubbly Again

Efforts to ensure that real-estate appraisers don't inflate valuations haven't worked out as expected.

December 4, 2014 at 5:10 PM UTC

Jonathan Miller writes about the housing economy and other aspects of real estate. He began a real estate blog, the Matrix, in 2005, and has written a column for Curbed.com. He is co-founder of Miller Samuel, a residential real estate appraisal company, and the commercial valuation firm Miller Cicero.

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A key goal of the financial reforms after the housing bust was to prevent banks and other interested parties from pressuring real-estate appraisers to inflate valuations.

One remedy that was folded into the Dodd-Frank Act led the industry to rely on appraisal-management companies (AMCs) as a buffer between appraisers and lenders. Since AMCs keep as much as half the appraisal fee paid by the borrower, today’s appraisers are effectively paying for banks to comply with appraisal regulations. Although this led many veteran appraisers to leave the industry, newcomers with less experience and market knowledge continue to enter. Research has shown this has contributed to a decline in appraisal quality.