Q: We live in a West Coast Florida beach town. We applied for a cash-out refinance in June, so we could consolidate our finances and pay off our mortgage on a long-held home in the north.

We were shocked, as was the lender, when the appraisal came in much lower than expected ($575,000). The problem seems to be that there are no appropriate “comps,” since the town is very small, and properties are extremely diverse.

Our home is a small five-year old Key West-style 1,320-square-foot ranch. It was custom-built above the flood plain, higher than the required hurricane standard, with tied-down roof trusses. It is a net-zero home with solar, a pneumatic elevator and super insulation. Our electric bills are virtually nothing, and they are rarely above transmission and taxes.

Despite all these amenities, the property comps were a 96-year-old wood-frame home, constructed at ground level with additions, a teardown and a house that’s a good comp now, because the new owners rebuilt it, but those improvements don’t show on the appraisal. I contested the appraisal, to no avail.

Recently, two homes that are very similar to ours sold, both for around $750,000. We reapplied for our cash-out refi, and as soon as the new appraisal was ordered, we were asked to pay $150 more than a normal appraisal because of the “large home and difficulty of the coastal town appraisals.” So, our appraisal cost us another $550.

I say all this because we really feel the independent licensed appraisers here are taking full advantage of their third-party status. Is there anything we can do besides coddling them? Their independence just seems to have fueled their ability to screw the homeowner.

A: We understand your frustration. Sometimes appraisers have a hard time with loan refinances. We have a friend who was thinking of listing his home for sale and thought it would be a good idea to hire an appraiser to give him an idea of the value.

Well, to their surprise, the appraisal came in about $100,000 less than they expected. They talked to the appraiser, and he told them that he had found quite a number of comparables in the area, ranging between $700,000 and $900,000. Given that range of comps, he decided to split it down the middle and gave them an appraisal of $800,000.

A week or so later, they interviewed real estate agents who all thought the property was worth $850,000 to $900,000. They listed the home for just over $900,000 and sold it for $850,000. The appraiser wasn’t necessarily wrong, but appraising a home is more art than science.

We asked our friend Jonathan Miller, chief executive of Miller Samuel, a commercial appraisal company based in New York City, and author of the weekly Housing Notes blog, to weigh in.

A little history: In 2009, as the Great Recession was underway and home values were crashing around the country, the Home Valuation Code of Conduct (HVCC) was created as a solution to a lawsuit between New York State and Fannie Mae and Freddie Mac (which underwrite the vast majority of home mortgages).

The concern was that lenders were picking appraisers who were providing appraisals that were high enough to seal the deal, rather than true independent assessments of value. Because buyers weren’t being given an independent analysis of how much a home was worth, they were being hurt (by potentially overpaying), even as lenders were getting deals done.

A year later, Miller explained, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed (now overseen by the Consumer Financial Protection Bureau), sunsetting HVCC but setting up a system where lenders don’t have direct control over the appraisers. Instead, they hire a third-party institutional middle company (known as an appraisal management company, or AMC) and the company hires the appraiser.

“Those AMCs take a large part of the borrower’s application fee from the appraiser, in many cases 50 to 70 percent of it, so what kind of experienced appraiser will that compensation attract?” Miller asks.

This has caused a different set of issues, because the middle companies are now incentivized to keep appraisal costs as low as possible, so sometimes appraisers who don’t know the local housing stock and have little to no experience are brought in from far away.

“The value the appraiser is providing is a professional value opinion, which is not a fact,” Miller said. “I have no idea whether this reader had an experienced appraiser in the local market or just the low bidder who could do this report quickly. I suspect the latter, based on what the reader has presented.”

“Since the financial crisis, the banking industry has overemphasized low cost and fast turn times and showed a limited concern about quality,” he explained. In addition, the appraisal industry is suffering from the same employment issues as other industries. Miller says appraisers continue to skew older as fewer young people enter the profession because of what he calls “nearly impossible economics.”

“The bank appraisal industry is literally feast or famine. The appraisal profession represents one of the last steps in the mortgage process on a purchase or a refinance and is the only one whose compensation is not contingent on the mortgage closing,” he wrote in an email. “What the reader describes is exactly what happened during the financial crisis, where lenders lost their minds and pressured appraisers all day long.”

When it comes to financing or refinancing real estate, an appraisal is an opinion about the value of a piece of real estate. Most borrowers don’t realize that the appraiser is not working for them, only the lender. That’s why Miller believes the reader’s frustration is misdirected.

“The only way an appraisal opinion is worthwhile is if appraisers take ‘full advantage of their third-party status,’ ” Miller noted, adding: “Otherwise, we are back in the housing bubble all over again.”

A final thought from Miller: “Incidentally, the second appraiser had nothing to do with the first appraiser, so the fairness of the additional fee (I assume it was through the same bank) is a bank decision, not the appraisers’. Those appraisers are kept separate from each other, so they aren’t influenced by the other’s result. Incidentally, the bank is the entity that made the decision without considering the new data.”

In short, if you have a problem paying an extra fee for your second appraisal, you should blame the bank, not the appraiser. Or perhaps the AMC, which suddenly decided to charge more once you were asking about a higher valuation.

Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (Fourth Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through Glink’s website, bestmoneymoves.com.

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