This can easily be a sale buster. Most buyers today are depending on getting a high mortgage that only comes with a high appraisal. When the appraisal comes in low, there are only three alternatives:

• The buyers can come up with more money to make up the difference between the lower appraisal and the sales price - often impossible for buyers already stretched thin to make the purchase.
• You, as the seller, can lower your price to accommodate the lower appraisal.
• The buyer can quickly ask for a reappraisal (which might not come in any higher), or switch to a different lender and a totally new appraiser.

None of these alternatives is particularly appealing. And you, as a seller may suddenly find that your sale is in jeopardy.

It's Part Of The Real Estate Cycle

More conservative appraisals are rapidly becoming the rule, rather than the exception. This typically happens at or near the end of a real estate cycle when prices start to level off, or even trend downwards. It happened in the early 1990s and is happening again, now. Here's how it works:

Federal regulators, looking around at the high appreciation in home prices, become alarmed. They rightly worry about the "bubble bursting." Many people buying at the top with little or no-down financing could end up owing more than their house is worth. They couldn't afford the payments (having counted on continued price appreciation to save their bacon), and might be forced into foreclosure. This would mean that the federal government could end up taking back a lot of partly worthless mortgages.

Hence, the regulators tell the banks, in effect, to cut back. Within the past few months, bank regulators have twice demanded that banks follow new and more stringent rules on home appraisals. Further, Congress and Federal regulators are considering rules that would ban lender influence over appraisals. No longer would a lender be able to demand that an appraiser meet a sales price target in order to get hired (called "pre-comping").

All of this is having a chilling effect on the home appraisal business. Appraisers, feeling the heat, have tended toward more conservative appraisals. And lenders have backed off on financing ever higher homes prices.

The overall effect is to actually slow the rapid appreciation in housing we've seen over the past few years in most parts of the country. As real estate professionals, and many home owners realize, much of the quick surge in prices has actually been fueled by easy financing. It's not just low interest rates - it's been ever higher appraisals that have made it easier for buyers to get into homes at ever higher prices.

But, not any more. As lenders tighten up, we can expect to see a slow down in price appreciation followed, in some overheated markets, by an actual decline in values.

No one is the "bad guy," here. It's all a symptom of a market that's overheated. Unfortunately, for some home sellers it means that in order to save the sale, you may find that you'll have to accept less than you hoped for. Since the process is likely to worsen, some sellers are opting to sell sooner, rather than later.