Purchasing a home or refinancing is becoming more tricky. To do these kinds of transactions, an accurate appraisal is needed. To complete an appraisal, appraisers look at the sold prices of similar homes near the one in question. However, with less home selling, or selling at a short sale price, etc, it is getting harder and harder to get good comparable figures. Values are also changing at a rapid base, as homes become foreclosed, bringing down the community value, etc. Appraisers are also having to drastically widen the range of the homes they look at to make an appraisal, as now there are no comparable figures near the home to be bought/refinanced.

To counteract this problem, appraisers started looking at contract prices, which are the prices agreed upon by the buyer and seller. Unfortunately, these are also not affective as many times those sales fall through. Many times the sellers list their home for too high of a value, overestimating its worth, called an “endowment effect” by Eric Johnson, a Columbia business professor. Of course in order to sell, they then have to lower the price, making a large gap between the listing and selling price. In New York, the gap seen usually averages about 16%.

Because of the problems facing the market, appraisers are also being pushed to be highly conservative when giving values. Joni Herndon, a Florida appraiser, remarked that "Lenders want the appraisal at the lower end of the range,...The lender may want it at $100,000 and the appraiser thinks it's worth closer to the high end of his or her range, say $115,000." If the lender rejects the appraisal, they either order a second one, the seller has to lower the home value, or the buyer has to pay more. A big problem seen, is that at times things more then likely come to a standstill, says Jim Amorin, president of the Appraisal Institute, "In some cases, none of those happens and the loan doesn't go through."

How are they coping? Some appraisers have taken to using stale comps, with negative time adjustment. They reduce the home value to reflect the market, based on prior sell prices. They have also used an automated valuation model, which is a math calculation to equate a base home price, by looking at sale price and square feet. Of course, none of these methods, take into account home condition or appearance. This can make qualifying for thing such as Obama´s Homeowner Affordability and Stability Plan difficult as you are only allowed to refinance if you are slightly underwater on your loan, therefore a correct appraisal is very important.