Diane Saatchi, a senior broker at Saunders & Associates in Bridgehampton, N.Y., says, "A low appraisal is common when the market is up because the appraisal is based on what it would have sold for when prices were lower." The opposite is true when the market is down.

In other words: in a hot market, appraisals can't keep up with the rate at which homes are selling, so the value of the home is sure to be lower than expected.

So what do you do if this happens to you?

You have four options:

1. Appeal the valuation

An appraisal appeal is sometimes referred to as a "rebuttal of value" and it takes some work. In fact, it takes the whole team.

"Homeowners, loan officers, and real estate brokers often work together to find better comparable market data to justify a higher valuation," mortgage consultant Casey Fleming.

This means that everyone has to put on their best Sherlock Holmes costume and start looking for anything that will help improve the valuation. Perhaps the appraiser overlooked some comparisons (homes sold within the past few years that are similar in style, location and size).

For example, it's not uncommon for an appraiser to use a comparable for-sale home that appears to be in good condition when in fact it was destroyed at the time of purchase and has been restored, Fleming says.

The loan officer will write an appeal using the new comparables and send it to the appraiser. There can be some back-and-forth negotiations before all parties reach a compromise on the new valuation.

Fleming says, "So far, my record on this is 9 wins and 0 losses." But I know a lot of appraisers who have adjusted their valuations. So, stay hopeful!

2. Getting a second appraisal

Saatchi says: In most cases, if the appraisal isn't as high as the agreed (contract) price, the seller's agent will ask to see the comps and get a second or third appraisal.

But this will likely cost you - not only will you have to pay for the first appraisal (in closing costs), but you'll also have to pay for an additional appraisal. Depending on the area, appraisals can cost anywhere from a few hundred dollars to $1,000. Sometimes, if the realtor or seller really wants to move forward with the sale, they will pay this fee as well.

3. Negotiate with the seller

If you're lucky, both you and the seller will budge a little.

You can go back to the seller and ask them to lower the price or split the difference," says Peter Grabel, managing director of Luxury Mortgage in Stamford, Connecticut. Sellers are under no obligation to do this, but they'd probably rather do it than risk losing you as a buyer and starting over. Other buyers are likely to have the same problem, so it may be best for the seller to renegotiate with you unless they have another offer".

Sellers may be more willing to cooperate, especially if the Federal Housing Administration is involved. Lenders often require the use of their own FHA-approved appraisers, which are "locked in" for six months.

Sellers may be forced to accept a poor appraisal or wait for a buyer with a different loan, explains Joshua Jarvis of Jarvis Team Real Estate in Duluth, Georgia.

Jeff Knox, broker and owner of Knox & Associates, a Dallas-area real estate firm, says this is the most common outcome in his area.

Of all the possible outcomes, this is the most frequent," he says. While sellers are usually upset that the appraisal is too low, most reasonable sellers eventually come to terms with the fact that any other appraisal from a prospective future buyer is likely to be nowhere near the appraisal."

4. walk away

No one wants to let a property slip through their hands, especially if it feels like their dream home. But be careful not to overlook a low valuation - you could end up losing thousands of dollars whenever you decide to sell.

If you have a valuation contingency clause in your contract, you can walk away, get your deposit back, and hope for better luck next time.