Low Interest Rates + First Time Buyer Incentives = Home Does Not Appraise

I am in the Bay Area - primarily Berkeley and Oakland. We have been experiencing a new twist in this interesting market place for the past three weeks. We are again seeing multiple offers - real multiple offers. I have been involved from the Buyers side in two situations with 10 offers during this time period.

The scenario seems to be that first time Buyers - supplemented by artificially low interest rates and first time buyer incentives - are bidding to a point where homes are going into contract for 5-10% more than the same home would have sold for in February or March.

Then along come the appraisers. There are no comparables within the past 3 months to support the contract price and the appraisal comes in below what a number of the offering buyers would have been willing to pay.

Result: the Seller has to re-negotiate. Result: Buyers need to have more than 20% down to have their offer accepted.