Appraisal discrepancies… That’s broker-speak for “the house is not worth what the buyer wants to borrow on it. The investor will not cover that mortgage.” Jenifer McKim reported on this for The Boston Globe this week.

Usually, appraisal discrepancies happen when a market is going up. Let me explain:

Let’s use something fairly perfect: condos in the same building that are the same size. They should be worth about the same, unless one has over-improved the interior with some over-the-top kitchen or flooring. There will be slight variations for view and balconies, but let’s pretend that none of the views are much and everyone has the same balcony. Also, let’s say we are in 1999.

Condo one sells for $279,000 in January and closes in February. Condo two sells in February for $282,000; closes in March. Then the spring market hits. Everything in the town goes up 10 percent. February 15th, condo number three comes on the market at $299,000; March 1st, condo four comes on at $309,000. March 15th, condo five comes on for $319,000.

Some buyers start condo shopping in March. They see $299,000 as a bargain, compared to $309,000 and $319,000. Even if they looked at the properties that recently sold, this was 1999; buyers were more resigned than I was about accepting the presumption of an annual price increase.

Sometimes the first condo after the increase didn’t appraise. Rarely, the second one wouldn’t. The third one had no problem. That was the reality when the market was kicking up.