Are you in love with your home? Well it is Valentine’s Day, so I guess you should be in love with something and it might as well be your home. But what if you’ve accepted an offer on your home, signed a contract with a mortgage contingency clause and are feeling pretty fat and happy right now. Hold on, don’t start packing the crystal yet, at least not until the bank appraiser has weighed in on your home’s value.

If the terms of the sale of your home include your buyer obtaining financing, then you can expect a visit from the lender’s appraiser. Real estate appraisers are employed by lending institutions to verify that the property being financed is indeed worth the mortgage being applied for plus the down payment.

The way appraisers evaluate property is mandated by previous sales of comparable properties. Primarily appraisers get their information from county records, but they may also solicit information from local real estate brokers regarding the condition of properties and market trends in order to draw reasonable and accurate conclusions.

In a real estate market that is basically level with modest appreciation or modest depreciation, the appraisal process has fewer disputes. However, if the market is appreciating at leaps and bounds every year, like we’ve experienced for five years, or if suddenly the market is depreciating, it becomes a challenge to everyone in the process.

We lived through the appreciating market and I’m sure there were plenty of appraisals that came up short of the selling price, since it was impossible for the appraisers to keep up with a market appreciating practically every day. Short appraisals can be resolved by either the buyer putting down more cash requiring a smaller mortgage, or the seller reducing his price in order for the home to qualify. Most of the time it’s a compromise to all parties to the transaction.

Now, however, we’re living through an adjustment to the real estate market that has not only fewer sales but also lower sale prices. In a sluggish real estate market, finding comparable recent sales could be a problem forcing the appraiser to use sales that may be out of the area or not equivalent to the property being evaluated and then making adjustments. This becomes even more complicated if there happened to be a very low or possible distress sale skewing the values even further.

Since appraisers are quick to point out that they are independent and unbiased in the evaluations, it’s difficult to get an appraisal you may not agree with reevaluated. Of course, a new appraisal can be ordered by either party to the transaction in the hope there may be a new comparable sale that would change the value of the property, or a different appraiser may view conditions differently.

During the best of times, evaluating property is more of an art than a science. It’s a business that is always playing catch up. The reality of the marketplace is invariably ahead of the published data the appraisers are obligated to work with. If you’re selling in this market, the best advice is to stay on top of all sales in your area, hope for a buyer with a lot of cash and love your home.

Happy Valentine’s Day!