The appraisal for the condo initially came in at exactly the dollar amount we needed to refinance it without putting up any more money — something I found fishy but did not question since it worked to our advantage.

But a week later, the appraisal management company that had sent out the appraiser reviewed his valuation and revised it downward, determining that instead of 20 percent equity in the condo, we had only 10 percent.

That’s when I called up the loan officer at the bank and basically asked the question homeowners everywhere are asking: How are you determining the value of my home? After all, both numbers seemed to me to be rather arbitrary.

I eventually prevailed and got the refinancing.

But around that time, I got the renewal letter for the homeowner’s insurance on our house in Connecticut and was shocked to see that it was being insured for a value 14 percent higher than we paid in 2008. I know homeowner’s insurance is meant to cover the cost of replacing the house, but the price we paid for our home in 2008 was not just for the house but included the yard, the street where we live, the property taxes, the schools and other intangibles. And the price I could get for the house now is less than I paid back then. So why the high appraisal?

The question isn’t a new one. After all, appraisals seemed to be just as subjective when the market was moving up. Why is the process so opaque? I set out to try to figure that out. Here are a few things I’ve found that can improve the outcome, though I can’t promise that you’ll be entirely satisfied.

SELLING AND BUYING One component of selling a home has always been gauging the emotion of a prospective buyer. But several brokers told me that buyers and sellers who need financing for a home should be concentrating instead on the temperament of the bank lending the money.

“Over the past two years, houses are not worth what the owners want or what the buyers will pay for them,” said Peggy Bates, a broker with William Pitt Sotheby’s International Realty in Stamford, Conn. “A house is worth what the appraiser says it is.”

She says she makes prospective clients have their house appraised before she will list it. If they insist on determining their own value, she said, she makes them sign an agreement to drop the price in four weeks if the house does not sell.

Her tough-love approach may be hard for some to swallow but it just reflects banks’ caution in making new mortgages with so many bad ones on their books.

But don’t assume that the appraiser will return with a value for your house that you agree with. First, banks are increasingly bringing in appraisers from other towns, if not other states. While this is done to comply with provisions in the Dodd-Frank Act aimed at establishing objectivity and preventing agents and mortgage brokers from influencing the outcome, it often produces results that fail to fully account for the central tenet of real estate: location.

Joseph C. Magdziarz, president of the Appraisal Institute and an appraiser outside of Chicago, defended his industry’s work but said many appraisers were now pressed to write their reports more quickly and for less money. In cities like Chicago, he said, local knowledge is crucial because prices can vary from block to block and also floor to floor in high-rises.

Even if the appraiser is local, Mr. Magdziarz advises people to review a copy of the report. “The appraiser who did my house talked about my fireplace, but I don’t have one and he got the size of the living area all wrong,” Mr. Magdziarz said.

REFINANCING The lure of incredibly low mortgage rates has piqued interest in refinancing existing mortgages. After all, going from a rate of 6.5 percent to 4.5 percent means significantly lower payments each month.

But lending requirements are strict even for people with an existing mortgage who have no problem making their current payments.

Article source: http://feeds.nytimes.com/click.phdo?i=50b2a8440e120e3681a7a017127bc457