Low Appraisals

New obstacle facing Seller’s is the Appraisal!  As if the Seller, in a Buyer’s Market, does not have enough challenges; we are finding a trend that cannot be ignored.  Appraisals are coming in below the negotiated sales price and throwing a wrench into the transaction at the last minute.
This year I had a home that was under contract for $440,000. The Seller felt they had given the home away at this price and was feeling that at least it would be over soon. However, when the appraisal came back at only $400,000 we were shocked.   The Lender was not going to loan any more than the appraised value.  So, now what do we do? Let the deal fall apart?
The solution in this situation was for the Seller to reduce the price another $20,000 and the buyer to bring an extra $20,000 to closing. The Seller felt they were held hostage at gun point and I did too.  It was not fair.  If the buyer is willing to pay this amount the home is clearly worth it.  Right?! 
They wanted to sell and figured if this deal fell apart it would likely be the same or worse scenario with a next offer.
I am aware of this same situation occurring throughout the city and nation.  And I am aware of at least 2 Seller’s in the Village of West Clay who were held captive to low appraisals.
It is important to be aware of recent “Sold” homes in your immediate area to know what to expect from the appraisal.  Appraisers are under pressure now to use only current comps. They must use homes sold in the last 6 months and preferably the last 3 months.
Using a local bank or lender for the financing is one good way to avoid this problem. The large National Lenders, such as Wells Fargo, are putting a lot of pressure on the appraisers to submit low appraisals.  And a lot of times their appraisers do not really know the area and the true nuances of a particular neighborhood.