Washington Post's "Lowball Appraisals Spark Uproar"

This article ran in the Post on Saturday regarding low appraisals coming in on new loans and re-fi's all over the country. This is a sensitive topic for me right now as I am dealing with an appraisal that came in low and it's insanely frustrating for my buyer, the seller, the loan officer and the agents involved. I remember sitting in Econ 101 years ago and learning that the value of a commodity is the price at which a seller is willing to sell and a buyer is willing to buy. In real estate we have asking prices, offering prices, price reductions, negotiations galore and sometimes even bidding wars that eventually arrive in a number at which the buyer is willing to buy and the seller is willing to sell. I understand that banks feel like there needs to be a check in place to make sure they don't get stuck with a foreclosed property that is worth less than the amount they have lent. That itself is the reason we are seeing more loans require 10, 15 and 20% down payments rather than the no money down and 5% down payment loans we saw just a few years ago. Adding a third party (the appraiser) into the mix who may or may not know the market or be doing competent research on the "comparables" can derail an otherwise smooth transaction. These appraisers have final say on the "value" even though any econ student will tell you that value cannot be determined by one person alone. When I give a seller a suggested price that is my opinion of what someone might be willing to pay, and an appraisal is just that, an opinion. New laws handed down from Fannie and Freddie stipulate that mortgage lenders and real estate agents cannot contact these appraisers to ask for revisions or explanations of an out of whack appraisal, so options are to negotiate the price down, come up with more cash, or start the process over with a new lender. A lesson for the buyers out there: keep those appraisal contingency's in there!