Appraisers keep hold of the reins as modern-day Gold Rush rages.

With residential prices reaching new heights every month and buyers still lining up to bid on even the most expensive apartments, conventional wisdom would dictate that everyone in the industry benefits. But while brokers maintain that whatever is paid constitutes the true value of a property, people in the appraisal industry are increasingly worried about overvaluation.

The problem is two-fold. On the one hand, it is much more difficult to perform accurate appraisals in the market as it is today, when comparable sales records from six months ago no longer tell you much about the current value of a unit.

"In an appreciative market that moves very quickly, the comparable information no longer reflects what the market is," complains Shaun Osher, CEO of CORE Group Marketing, a residential brokerage firm. "Often, what will happen is that something will close that was in contract for more than a year and the purchase price will represent a number that's lower than the market price. I think that what's happening right now is that appraisers are undervaluing the properties."

John Brenan, director of research and technical issues with the Appraisal Foundation, agrees that the situation can create a lot of mistakes, but thinks that the numbers can be slanted both up and down.

"It certainly is something that has happened in the past and can happen again," he explains. "An appraisal is a stop shop in time. It is based on the appraiser's opinion as of today and he might be looking at data and information that doesn't necessarily reflect today. Odds are that the comparable sales he is looking at have occurred in the past few months. In a market that is moving, whether up or down, it is sometimes difficult to determine where you are at that point of time."

At the same time, increasing pressure from mortgage brokers interested in closing the deal makes some appraisers too anxious to please their employers.

According to Patrick O'Brien, chief operating officer of AMCO, a valuation management company, things have gone far past mere confusion. He notes that in an effort to bypass industry regulations, mortgage brokers will often hire inexperienced appraisers who, in turn, will assess the value of the property above the real amount.

"I'll give you a perfect example. There was a case in Arizona where someone had a property out for $450,000. The appraiser had just appraised it at $450,000. An investment company bought it and tried to flip it a few weeks later for $560,000. They came back to the original appraiser and he asked them what they put into the property. They said that they didn't invest anything, they just needed him to sign the document."

"He said absolutely not, but they found an appraiser who would do that, and they found one because the system is set up in a way where legitimate lenders and large companies will not use appraisers who have less than three years of experience," O'Brien says. "There are people who have to wait several years to get their certification. Mortgage brokers figured this out. You don't sign this, you are out of a job."

O'Brien feels that such practices might have terrible ramifications, both for the industry and for the buyers who end up with something not worth their money. And when foreclosures begin, the appraisers will be the first ones to get the blame.

"For the last ten years, honestly, it's been the Wild Wild West," he says. "But it's coming to an end. In the past, you were pretty sure that the market was hot enough to cover the [overvaluation] up over several years, but no one is really sure that this market will be able to sustain this going forward. We've got slowly increasing interest rates. The market itself tethers and Alan Greenspan is talking about potential bubbles. If this market goes south--and it might not be everywhere, but in isolated pockets--all hell is going to break loose."

Appraiser specialists also counter the brokers' claim that if someone is willing to pay $50 million for a high-end apartment (the asking price for the 20,000 s/f New York residence owned by the estate of Doris Duke), then that's what the apartment is worth.

"The appraiser's job is to mirror the market," says Brenan. "When he is performing an appraisal report, his job is estimating what the market value is with a knowledgeable buyer and seller, typically motivated. It is true that if someone is willing to pay a particular price, to that buyer that's what it is worth. The appraiser's job is to determine whether that's what a typical buyer is willing to pay."

But whether overvaluations are due to honest mistake, deliberate deception or an unorthodox philosophy, Robert Smith, president of the Long Island Chapter of the Appraisal Institute, says that experienced professionals are more than able to handle a volatile market.

"This market has seen so many transactions--there is so much information that is available to the appraiser, and to the public as well," he explains. "The world is different now and our skills have to be honed in analysis. This market is difficult for people who don't want to do research, but I honestly believe that if you work hard, there should be no problem. This market is a good market for doing your work."