Sunday, July 08, 2007

Arizona Board of Appraisal gets slapped

In economics, capture theory is the theory that a regulated firm (or firms) captures the regulator and makes a monopoly profit. The Arizona Board of Appraisal was acting as a captured regulator when it sent two cease and desist letters to Zillow.com objecting to their Zestimates.

Boards become captured because of rational ignorance. Most of the public makes the rational choice that becoming informed about something isn't worth the cost. Hence, only the people that care (firms in the industry) pay attention to what the regulator is up to. In this case, it appears that the public and hence the legislators started to pay attention.

Zillow.com, the popular real estate Web site, is in the clear for offering its home-value estimates in Arizona.

Earlier this week, Gov. Janet Napolitano signed into law Senate Bill 1291, with an amendment that allows Zillow to operate in the state.

The Arizona Board of Appraisal a year ago ordered Seattle-based Zillow to stop offering its property estimates because it does not have an Arizona appraiser's license...

Charles Havranek, Board of Appraisal vice chairman, said the board at its June 21 meeting voted 6-1 to rescind its two previous letters ordering Zillow to cease and desist.

Note that the board's lopsided vote to recind the letters occurred prior to the new law taking effect.

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