Andrew Cuomo, the New York state attorney general, is investigating the possibility of corruption by some appraisers in New York City, according to this intriguing article in the New York Observer. Here’s the headline:
New York’s Longest-Running Real-Estate ‘Joke’
Since mid-May, the Observer says, Cuomo has issued subpoenas to three companies. The question is whether appraisers are putting unrealistically high valuations on properties to curry favor with their clients, who need big numbers to justify the mortgages they’re taking out. It’s a question that should sound familiar just about anywhere in the U.S.
One appraiser who is not under investigation, Jonathan Miller of Miller Samuel, tells the Observer that only about one in four or five American real-estate appraisers does his or her job independently.
“The rest of them are order-takers; they’re making the number, and it all works out,” Miller says. “It’s a joke—the system is a joke. … There is very little independent analysis of what collateral is really worth.”
For more of Mr. Miller’s blunt opinions, check out his always entertaining blog, Matrix.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.