Skyrocketing home prices in hot areas are creating a gap between the asking price on houses and the appraised value of the property.

Why? Because appraisers base their valuations on past sales. They look at what comparable homes have sold for over the past few months. In areas where home prices have been climbing from 5% to 43% per MONTH appraisals often come in below the contracted price.

This can kill a deal, because the new buyer will have to make up the difference between the contracted price and the appraised value. Lenders base the amount they will loan on a percentage of the appraised value.

For example: A home has a current value of $200,000 in a market that has appreciated 10% per month over the last few months.

However, the comparable sales over the months indicate to the appraiser that the home's value is just $180,000.

If the appraisal would come in at $200,000 a lender would usually make a mortgage loan of 80% or $160,000. That means the buyer would be required to make a $40,000 down payment.

But look what happens now. The buyer has contracted to buy the home for $200,000, but the appraisal comes in at just $180,000. Now the mortgage loan will be just $144,000 and the buyer will need a $56,000 down payment.

That extra $16,000 is often enough to kill a deal.

What should you do as a property seller in that environment?

As an informed investor you should always schedule a home appraisal during a period when you can be there to talk to the appraiser. It's your responsibility to point out to the appraiser any improvements, features or additions that add value to the property.

A skilled appraiser will usually notice anything that might increase (or decrease) a property's value.... but it's your job to make sure he or she doesn't miss anything. Be sure to explain that the home is especially well located for commuters, or the school district shows a marked improvement, or a modern new shopping center has recently opened nearby.

Check with your Board of Realtors and get the latest price appreciation figures for your area. In other words... sell the value of the property to the appraiser in any way you can. The time you spend doing that can payoff in thousands of extra dollar.

One more tip... in your sales agreement include a
About the Author

Mark Walters is an investor-entrepreneur predicting a coming wave of foreclosures. Learn his pre-foreclosure system here http://www.pre-foreclosure.biz

(Use this article only if you make this an active link. Thanks)