If you have financed a recent home purchase or refinanced your existing loan in the last year without any glitches, you are one of the lucky ones. In April, the National Association of Realtors reported that 11% of Realtors surveyed said a purchase contract was cancelled due to an appraisal coming in below the negotiated sale price between a buyer and seller, 10% said a contract was delayed and 14% said a contract was renegotiated to a lower sales price as a result of a low appraisal.

You’ve probably heard that the requirements to qualify for a mortgage have gotten much more difficult in recent years largely due to the banking industry meltdown and the Federal Government’s lack of oversight. Now there is a bill in Congress that would change the minimum down-payment on FHA loans to 20%, which would almost certainly wipe out almost 45% of U.S. home sales. I don’t think that bill will become law because it would pretty much decimate the real estate industry and cause a prolonged real estate depression.

Currently, the real estate market is in a prolonged black hole. Lingering foreclosures on the books of mostly national and large regional banks offers no real end in site. High unemployment is stifling demand and the ability for purchasers to buy mid-range priced homes and even million dollar homes in Hingham, Norwell, Cohasset, Scituate, Duxbury and Hanover. First time buyer homes between $200,000 and $300,000 continue to be the best selling class on the South Shore. Overall inventory throughout Eastern Massachusetts and Greater Boston is up, prices are down and days on market continue to be longer than what sellers hoped for. There are some silver lining headlines such as Hingham, Norwell and Cohasset as well as hot spots in the city like South Boston, the Back Bay and the South End. Strong school systems, quality of life and easy access to downtown Boston have contributed to those silver lining communities.

Bankers are conservative by nature, which I believe is a good way to operate. So being careful in who you lend money to makes sense. Having the ability to repay the loan for the long term and having some equity in the home off the bat makes sense too. The bank wants to make sure the home you are purchasing is good collateral and secure. This means the bank wants an independent appraiser to give them a fair market value of the home as of today’s date. If for some reason you can’t repay the loan and the lender is forced to foreclose on the property, they want their initial investment back. Unfortunately, many of the foreclosures occurring today were from bad loans, some of which were fraudulent by both buyer and lender in collusion with appraisers and others. How the government and Wall Street let this happen is beyond comprehension, but it boils down to greed mixed with politics.   

The bottom line is this: Buying a home can be easy – if you have cash and a motivated seller. Buyer a home and financing it might not be so easy. If you are a seller, remember that your Realtor is trained in providing you with a fair market value of your home. It may not be what you want or expected, but it is most likely the price that will not only attract a buyer who sees the value and agrees buy it, but more importantly, it won’t end up being one of the many purchase contracts that has to be canceled or renegotiated due to a lower appraisal. In today’s real estate market, an important discussion to have with your Realtor is the value of your home with apple-to-apple comparisons of homes that have sold in the neighborhood as well as consideration given to how a bank appraiser will view and ultimately value your home. If you have