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My local MLS has a pop up every time on sign on with links to different relevant articles in the real estate field.  I clicked on one entitled "Five Ways to Fight a Low Appraisal."  Curious, I took a look.  In it were the same inane "steps" agents are given over and over again after they receive the low appraisal.

I suggest a few different, proactive methods that will prevent the "low" appraisal from ever getting written and I can almost guarantee the result.

1. Agents must price the home correctly.  When setting a sales price the professional method for agents is to create a BPO or mini appraisal of homes that they believe are comparable sales to show the owner how he/she has managed to come up with the listing price they suggest.  If you do this step correctly, pricing the home correctly, the chances of a low appraisal are slim because you'll know what similar homes are selling for in the marketing area.  It sounds crazy but very often listing prices are set with NO basis in reality.  Either an agent just makes it up or the agent lists the home for the price the owner insists on with no basis in reality. And then everyone is surprised by the low appraisal!

2. Okay, let's assume you've priced the home correctly and now the home is quickly under contract (because it was priced correctly).  Appraisal day has arrived.  What do you do besides open the door?  In most instances, in my experience, the agent does nothing!  By doing nothing you are squandering any chance of influencing the result of the appraisal.  The best agents in the industry open the door when I arrive, shake my hand and politely hand me a folder with comparable sales they suggest may be helpful.  Brilliant!  That's an agent doing his/her job. Now, please don't get me wrong. I'm not suggesting the agent exercise undue influence or pressure.  However, there is nothing wrong at all with an agent asking an appraiser to consider a particular group of comps.  This suggestion, which is often done after objections to the "low" appraisal, is critical.  Put your comparable out there early!  Then if the appraisal is low and the appraiser did not consider your comparables you will have a basis to ask why and demand an explanation.  Too many agents grumble that they don't want to do the appraiser's job.  You're not.  You're doing your job by making sure the house gets sold.  I love it when an agent hands me comparables.  I might use them, I might not, but when I don't at least I know to be ready for an explanation as to why not.  Come on agents!  Don't drop the ball after the contract is signed!  Step up.

And that's it.  I know there are incompetent appraisers out there, I know.  But it is the agent's job to make sure that a low appraisal doesn't happen by giving the appraiser what he/she thinks are good comparables and setting realistic listing prices. Finally, I note that what I mean by "good" comparables are sales within one year, in the marketing area and similar in condition and square footage. Okay?  And finally, if you believe the appraisal is low, READ IT.  So many times I been accused and asked the accusers about what comparables they would have used and it turns out they are the ones I used!  Remember, there is a difference between low appraisals that incorrectly value homes and "low" appraisals that come in below the sales price.

Lately I keep hearing that some of the reasons behind this flat real estate market are the inability of folks to get the 20% down payment required by many banks and fear that the market will fall further.  I don't think these reasons should apply to the greater New Orleans area.  

First, as to the 20%, yes, it's clear that banking restrictions are tighter than ever.  However there is a simple solution in most cases: FHA, which has loosened its restrictions, has become the new "sub-prime" contender in the market.  With approximately 3% down and a reasonable credit score, the loan is yours.  And while there is PMI to contend with, it's generally much less than PMI on regular bank loans less than 20%.  So, go for it.  With interest rates so low and the ability to put 3% down this is a great time to buy.

And, (this is simply my opinion), it looks to me like the greater New Orleans area has hit bottom in most areas and that the market has become stable.  In certain areas, such as the Crescent or "sliver by the river" prices are actually sky rocketing--all of Uptown, the CBD, the French Quarter, Marigny and Bywater are back to pre-recession highs.  Areas that were hard hit, like much of the Westbank, New Orleans East and St. Bernard seem to have stabilized.

This may be a great moment to buy with low interests and great prices on many homes.  The opportunity will pass, like everything else, so I suggest thinking of taking advantage of it now.