Since an appraisal of a property is based in part on comparable sales in the area, appraisers sometimes find it difficult to keep up when homes are selling quickly.

Appraisals are based on past sales data, the location of the home, the size of the lot and the condition of the home. An appraisal is used primarily to protect the lender's interest in the property, so lenders look carefully at the appraisal to make sure they don't underwrite properties for more than they are worth.

"Everyone needs to know that appraisers are absolutely buried at this time," said Jimmy Kang, a senior home mortgage consultant with Wells Fargo Home Mortgage. "So far, since a lot of multiple offers are closing, values have been OK on most of my purchase appraisals. We are seeing some time adjustments on appraisals to allow for the increased purchase prices due to multiple offers."

Kang recommends Realtors set correct closing timeline expectations. "Some Realtors are still expecting 10-day loan contingency removals. We're lucky to get back the appraisal in 10 days. Realtors can help by making sure to return appraiser calls setting an appointment and by supplying comps."

Brian Kessler of Intero Real Estate Services in Los Gatos said the current market situation has created some appraisal problems, especially when good properties are selling at or above the list price in the local market area.

"Unfortunately there are no comparable sales to justify some of the current sales. In addition, if the buyer is putting down a relatively small down payment, it can be difficult to get attractive financing, as most lenders only want to lend 80 percent of appraised value. Most homes that do not appraise are still able to close escrow, as aggressive buyers will pay the price in order to obtain a good piece of real estate."

Kessler said buyers don't always understand that an appraisal is not an exact science and there are many factors beyond the scope of a traditional appraisal that determine real estate values. "With so many multiple offers, quite often it is the buyer with the largest down payment who is able to waive the financing and appraisal contingencies and succeed at closing escrow on their new home."

Realtor John Leslie of Alain Pinel Realtors in Los Gatos also thinks appraisals are subjective and believes they often depend on the experience of the appraiser.

"In this hot market, comparable sales that have closed escrow are gold. The trouble with multiple offers is that they caused inflated selling prices that set new price levels. Appraisers can only use sold properties to meet the lending conditions. When the selling prices jump up rapidly, the appraisers are left in the dust most of the time," Leslie said.

Leslie places experienced appraisers into two categories—either conservative or liberal. "You definitely want a liberal appraiser when the market is hot. They find a way to justify a new selling price. They look for comparable sales as routine, but make adjustments for value and market conditions. Not all lenders hire appraisers that allow for this liberal approach."

If a lender is very conservative about its loan conditions, it will hire conservative appraisers. "Not every lender wants to take risks lending on inflated properties. Agents have to look out for their clients that they choose lenders that are aggressive in making loans in a hot market," Leslie said.

Realtors have the ability to know which lenders are competitive, so Leslie recommends working with an experienced Realtor who knows which lenders to call.

"If you are refinancing your home, an appraisal is vital to getting the loan and usually the cash out that you want. Due to this hot market, have your agent find lenders that are highly competitive with their rates and loan packages. These lenders are not shy about getting appraisals to work for their clients. Do your homework and get several lenders to compete for your refinancing goal," Leslie said.

When the market is moving so fast, Realtors also find it difficult to keep up with price points when they prepare a comparative market analysis, which provides information on recent selling prices of similar properties in the same market. To determine the listing price for a home, the goal is to strike a balance between a figure that will eliminate potential buyers and a low price that doesn't accurately represent the worth of the home. A Realtor is a good resource and can provide vital information when analyzing current market values for homes.

John W. King of Alhouse King Realty believes Realtors can help the appraisal process go smoothly with an experienced approach to the transaction.

"This type of market drives appraisers nuts for a couple of months until enough closings happen to justify the new market values," King said. "Appraisers must consider pending sales and whatever information they can get from the listing agents on the comparable properties, including how many offers and what the closing price will be on the home. Most appraisers familiar with this type of marketplace can make adjustments for the volume of activity on the home they are appraising."

The buyer's agent can provide critical information to the appraiser, which can help the appraiser meet the purchase value. "Having an experienced agent who has handled these scenarios is very important to successfully closing the sale," King said.