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Your Move When Appraisals Lag Home Price Recovery

Both parties can use sites such as Realtor.com, Trulia (TRLA) and Zillow (Z) to assess prices from sales in the past two or three months. Be sure the homes are really comparable to the subject property, then use the comps to calculate a price per square foot that can be applied to homes in the neighborhood.

The real estate agent will also have thoughts on this. Each party should pick an agent who has been in the local market for a number of years and has lots of current listings and recent closings. Part-timers and newcomers won't have enough feel for the market to spot recent trends.

Keep in mind, though, that an agent has a financial incentive to encourage the seller to be "realistic" about price, or to ask a bit less. Most agents would prefer a slightly smaller commission for a home that sells quickly.

HSH suggests that the seller be present during the appraisal to point out value-enhancing features the appraiser may overlook. The seller can also give the appraiser a written description of the home's merits, as well as a list of comparable homes in the neighborhood that have sold.

Buyer and seller should study the appraisal closely, looking for errors, oversights or the use of comparable sales that aren't really comparable. If that doesn't work, the buyer can ask the lender to allow a second appraisal.

The buyer should be sure the sales contract includes the standard language canceling the deal if the appraisal comes in too low. A low appraisal thus allows the buyer to negotiate for a lower price.

Finally, the buyer, if possible, can offer a larger down payment, reducing the mortgage required to a level below the appraisal.

None of these techniques is a surefire way to get the deal done, but they could close a modest gap. As the process continues, both parties should constantly scour the market for fresh comparables -- data all parties can use to keep abreast of a market that could change quickly as spring approaches.

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