Appraisal is partly art, partly science. The tricky part is appraising in a very slow market, where there are few (or maybe no) good “current” comps.

Your friend’s appraiser who first assigned a value of $405k relied on some old comps – but maybe there weren’t any current ones. The fact that a buyer was willing to offer that much suggests that this value was within reason. That it did not sell is due to bickering over closing costs – not necessarily a function of value. Perhaps the buyer wasn’t really wanting to buy at $405k and wanted some way to either get a lower price or get out of the purchase.

The fact that eight months passed between the failed sale at $405k and the sale at $345k indicates a strong decline. Not knowing where the condo is it’s impossible to say what happened. Did other people put their condos on the market too, with a glut forcing down prices, or did your friend price her condo below market just to get a quick sale?

On the second go-around the appraiser probably used the sales price as market value because there were few good sales.

Appraisers are under enormous pressure to “make” the number needed so a sale can close. It’s illegal, but there are many cases where lenders pressure appraisers – especially in “up” markets, but sometimes in “down” markets as well (where there are few sales and appraisers are competing for the few appraisal assignments). Lenders will hint or suggest that they want “cooperative” or “helpful” appraisers, and everyone knows what that means. I’ve been pressure on many occasions. Where a lender/client can point to sales that I may not have known about I am more than willing to reconsider my conclusions. However, at times a lender or client will simply yell, “You’re stupid…you don’t know what you’re doing.” I will always politely ask if there are any truly comparable sales that I have overlooked, and I usually get silence followed by a hang-up.