Appraisal issues on the rise??

In the past two months, I have experieced problems with appraisals on FIVE separate transactions!   Some have been with me representing the buyer's side of the transaction, and some with me representing the seller.   I am not sure if other agents are also seeing this problem more frequently, or if I am just having a run of bad luck with appraisals!

For the most part, I am seeing that appraisers are operating in an ULTRA conservative mode when giving a value to a home.  Buyers do not necessarily approach the market in this same way.  A buyer is evaluating what is on the market, and making a purchase decision based on what they have seen.  When I represent a buyer, I  run a report to show the comparable sales over the past 6 months to ensure we are making a fair offer, and paying a fair price.  We can often see that there IS extra value in a home's location, maintenance level, and improvements.  When I represent a seller, I do much the same thing.  We consider comparable sales over the past 6 months to establish  a list price.  If a home has been improved substantially (especially in areas of maintenance -- new roof, a/c units replaced, appliances replaced, etc), more value is given to these homes.  If a home has a more preferable location, more value is given to that as well.  In each of my appraisal issues over the past couple of months, appraisers did not adjust or give any value for these differences in homes.  It creates an incredibly frustrating situation for both the buyers AND the sellers!

What happens when a home doesn't appraise?  If the buyers are purchasing with a conventional loan, they have the option to put down the extra money that represents the difference between the sales price and the appraised price.  Sometimes, that money is not available!  Other times, the buyers lose confidence in the home they are purchasing and decide to walk away from the transaction.  The seller may need to compromise if they want to save the deal.  If the loan is an FHA loan, the buyer simply will not get the loan unless the price is adjusted to the appraised value.  

Sellers must be very aware of where the values are in the neighborhood when setting a list price.  Also be careful not to over-improve if you expect to get all of that money back when you sell.   When setting the list price of a home, carefully consider the sales over the past 6 months of homes in the area that are similar in size, age and amenities.  This is what the appraiser is considering. 

Buyers should also carefully consider what the past 6 months sales have been, and be prepared on how you want to proceed should the home you are purchasing not meet the appraised value.  Does it mean that the home isn't worth what you are under contract to pay?  Not necessarily!  Remember, the appraiser hasn't been shopping for months for a home, and hasn't been in the other homes you have seen!  The appraisal is a tool to protect the lender.  It protects the consumer a little, but in my opinion, the main purpose of the appraisal is to protect the bank.