You receive a telephone call or visit from someone who is considering selling his home if he can get the "right price". You then offer to appraise his property to arrive at an estimate of its market value (generally considered to be the highest price a buyer would be willing to pay and the lowest price the seller would be willing to accept).
Arriving at the property, you begin to collect the multitude of facts and figures needed to prepare your appraisal; your notes include the square footage of the home, its age, number and size of rooms, architectural style, type of construction, general inside/outside appearance/condition, the legal description of the lot, utilities, landscaping, tax information, and other relevant data.
Back at your office you analyze and interpret the information in light of your sales data on comparable properties (Market Comparison/Comparable Sales/Market Data Approach) making the necessary adjustments to allow for individual differences between the subject property and the comparable properties. After correlating this data, you arrive at your final estimate of value: $45,000.
You then report your estimate to the property owner only to find that he has received an "appraisal" from another broker who has estimated the value of his property to be $60,000, and he has listed the property with this broker because he can "get him the most money". Puzzled by the vast difference in the two opinions of value, you contact the other broker to determine how he arrived at his appraisal figure, and he can offer little or no factual evidence to support his estimate. He simply felt that the property was worth $60,000!
While it is often argued that brokers who inflate appraisals for the purpose of obtaining listings are only hurting themselves because they will likely be wasting their time, energy, and resources attempting to sell a property at an unrealistic sales price, nevertheless it can also be argued that they are performing a disservice to the property owner by giving him a false impression of the value of his property. Also harmed by such "inflated appraisals" are those conscientious brokers who employ established appraisal techniques but in doing so are denied listings, and co-brokers and selling brokers who must put forth their best efforts to find a buyer at the inflated and unrealistic listed price.
While your real estate license does not qualify you as an expert appraiser you must be familiar with basic appraisal techniques and must diligently and carefully apply those techniques to your daily appraisal assignments in order to competently perform as a broker or salesman. For that reason both real estate pre-licensing courses and licensing examinations place considerable emphasis on the subjects of valuation and appraisal, and the Licensing Board strongly encourages you to expand your knowledge of property valuation methods through continuing education.
To make a substantial and willful misrepresentation to a prospective seller as to the estimated value of his property for the sole purpose of influencing, persuading or inducing him into a listing contract is both damaging to the image of the real estate industry and potentially a cause for disciplinary action by the Real Estate Licensing Board.