Recipe for Bubble Bath?
this whole article is about buyers using 4-8 different appraisers until they find one willing to give them an appriasal HIGH ENOUGH to justify their realtors inflated idea about how much the house is worth.
I will parse it paragraph by paragraph next.
Home deals fizzle when appraisals fall short | The Arizona Daily Star �

As if finding a house weren't hard enough in Tucson's tight residential real-estate market, more and more buyers are finding themselves in a pickle when their appraisal comes in below the asking price.

Mortgage firms use appraisals to determine how much they'll lend home buyers. When a home is appraised at less than the sale price, the buyer must come up with more cash, walk away from the deal - or get other appraisals.

"More sales are falling through and those homes are coming back on the market," said Judy Lowe, president of the Tucson Association of Realtors Multiple Listing Service.

According to statistics from the listing service, there were more homes on the market and fewer sold from March through April. The number of homes actively listed for sale on the service increased from 3,493 in March to 3,640 in April.

Appraisals - independent evaluations of a house's value - are done to reassure lenders that they're making a good investment. Bound by ethical rules, federal mortgage guidelines and basic business practices, appraisers must consider how much comparable homes recently sold for. But homes here are appreciating so rapidly it can be hard to match an asking price when a very similar home down the street just sold for $10,000 less.

Costing anywhere from $300 to $1,000, appraisals are usually paid for by the buyer. If one appraisal comes in low, buyers and sellers can ask the appraiser to reconsider or hire another appraiser. Costs can add up.

Nicole and Kevin Schmidtke know all about that. Outbid three times as they looked for houses, they were determined to move into the next one they really liked. They found it in a three-bedroom house built in 2000 near West River Road and North La Cholla Boulevard.

The Schmidtkes bid roughly $20,000 over the asking price, which was near the low $200,000s. But with their first lender, the Schmidtkes' appraisal came in below $200,000. So they went to a different lender who had three more appraisers look at the house. Two of the appraisals were higher than the first, but still lower than the Schmidtkes' bid.

"Nobody would give us what we thought it was worth," said Kandee Myers, the Schmidtkes' real-estate agent.

Myers said the couple would have had to come up with the cash to pay the difference, according to a requirement in their agreement with the seller. They were prepared to abandon the deal and start pounding the pavement again.

Then hope came. An almost identical house just down the street was placed on the market for $10,000 more than the Schmidtkes bid for the home they wanted. They went to a third lender, who had five more appraisers look at the house.

At last, two appraisals matched the asking price. The couple closed on the home June 9.

"They came up with two (appraisers) that found ways to make the market research match what we were buying. We didn't feel like we were paying too much for the home," Nicole Schmidtke said. "We knew, based on what we had seen in other neighborhoods, this was a better house."

Buyers often need to be willing to pay more than the asking price and to put in multiple bids these days, said Paul Volpe of Nova Home Loans, which financed the Schmidtkes' mortgage. And there are few mid-priced homes available.

"You've got very, very little inventory, especially under the $300,000 range. It becomes a bidding war and it's not unusual to see a purchase price come in 10, 20, 30 thousand over the list price," Volpe said.

Volpe said appraisers should consider pending sales, in which homes are in escrow and the sale price may be higher than the asking price.

Low appraisals are a "phenomenon" in the market now because prices have risen so quickly, said Cary Ridenour, a senior vice president and co-founder of Charter Funding, a local lender.

"I haven't seen it increase this dramatically since we opened this company" in 1996, he said.

From March 2004 to March 2005, the median home price increased 11.4 percent nationally and 21.4 percent locally.

When appraisals come in low, buyers often find ways to come up with more cash, Ridenour said. Failed deals because of low appraisals are "happening a little more" but still are not common, he said.

The issue will begin to resolve itself as Tucson's housing market slows. In a slower market, there won't be such large price differences between one sale and the next.

"Right now people refer to it as a bubble, and Tucson seems to be on a bigger bubble than most of the rest of the nation, so you always want to be careful," Ridenour said. "But this thing could keep going and going."

The hot market is tough for appraisers, too, said Sarah C. Vetault, a certified residential appraiser in Tucson and a member of the Arizona Board of Appraisal.

Appraisers are constrained because they must look at homes that have closed on escrow, a requirement under most lending requirements. It is true that closed sales are lagging behind bidding prices.

"The market is not really uniformly moving up. There are many times where closed sales don't support bidding prices. Most times, an appraiser who's doing a thorough job can document that and things are OK," Vetault said. "Other times, there aren't multiple offers and there's just available listings that don't support it."

Still, fizzled deals aren't a sign that a perceived real-estate "bubble" is about to pop, said Mike Waling of Casas Adobes Realty.

"I believe that the market, to some degree, is being adjusted in a false sense because appraisers are dictating by their appraisals, dictating the market," Waling said. "What is value? In my mind, a value is what an informed buyer is willing to pay and a willing seller is willing to sell."

Glenn Bancroft, a real-estate agent and founder of Bancroft & Associates, offers another theory for why more appraisals are coming in low.

"It's from (real-estate) agents who are not necessarily, in my opinion, being honest with their clients," he said. "If a client wants $400,000 for a $350,000 house and then it will appraise for $350,000, well, that's the way it's supposed to be. Just because you want a particular dollar amount for your house doesn't mean that's what it's worth."