The agent was concerned because he felt that appraisers should value a property at the highest price that a buyer would pay.
This was my answer to him-
I appreciate your comments on current problems with appraisals. I too have noticed that some appraisers tend to undervalue properties, which is just as wrong as overvaluing a home, but I disagree with your definition of market value.
The highest price that a buyer is willing to pay is not market value, it is the price for that specific transaction. Market Value is the estimated amount for which a property should sell on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing with both parties acting knowledgeably, prudently, and without compulsion. In other words, market value is the most probable price that a property should sell for to a typical buyer. That is the value that appraisers are obligated to discover.
It is important to distinguish between Market Value and Price. A price obtained for a specific property during a specific transaction may or may not represent that property's market value. Certain considerations may have been present, such as a special relationship between the buyer and the seller. Another possibility is that a specific buyer may have been willing to pay a premium over and above the market value, if his subjective valuation of the property was higher than the Market Value. I am sure you have had a buyer that "just had to have" that particular house, even though it may have been priced higher than Market Value.