When real estate prices are going up, buyers and sellers are often surprised when the lender's appraisal comes in lower than the sales price. There are reasons for this.

Appraisals are based on the sales price of homes recently sold. Those homes must also be located in the sale area.  Unfortunately, in a rising market, those past transactions are likely to be at a lower price.

Because of new restrictions placed upon the relationship between lenders and appraiser, buyers and their mortgage representatives have less control over the appraisal process. Today, lenders order an appraisal from a list of approved appraisal companies,  and then a third party chooses the appraiser.

That appraiser may not be from the local area and this can adversely affect how the appraiser interprets what constitutes a "comparable" home and neighborhood desirability.  To help out of area appraisers, a listing agent can prepare documentation to demonstrate a home's unique value and market desirability.

Some appraisers have been known to recommend that the sellers (or their agent) prepare a package of information on the home, including data on comparable houses and any improvements that have been made that should influence the value of the home. Our agents are skilled in preparing solid documentation to assist those out-of-area appraisers. (See link below for a timely Washington Post article)

Read the full story in the Washington Post