The number one reason for home purchases not closing is that appraisals are coming in low, or banks are shaving off value of good appraisals. Banks are fearful of Fannie Mae's policy of forcing them to buy back a loan if it is over valued, and are undervaluing the properties. Some use computerized valuation programs that only rely on public record data and give no considerations for interior or exterior upgrades. Buyers rely on these appraisal figures and either can't or won't come up with the difference. This hurts the sales and also drags down the values of neighboring homes.
Fannie Mae has come up with a new rule effective September 1 that will no longer allow banks who sell their loans to Fannie Mae to arbitrarily drop their values.
There are other issues with appraisals for these loans. Many times inexperienced or out of area appraisers are performing appraisals and using unsuitable comparables. These issues will also be addressed, and hopefully our values will begin to stabilize.