What’s going on with appraisals in some parts of the country? Mortgage lenders and appraisers say they’re increasingly coming in with valuations higher than the contract prices agreed to by sellers and buyers. The differences can range into the thousands.

Are some sellers giving in to lowball offers, fearful that they can do no better in the wake of the sub-prime mortgage implosion and home-sale bust? Or are appraisers simply lagging behind downward market adjustments?

“We’re seeing it a lot now. Appraisals are coming in higher than the contract,” said Patrice Yamato, president of Plaza Mortgage Group. It’s a reversal of the pattern during the housing boom years, when appraisals often came in at or occasionally below the contract price.

“I think buyers are pushing very, very hard,” Yamato said, and they’re walking away with steals.

Appraisers insist that their value opinions are based on hard numbers: recently closed comparable sales, current comparable listings, pending sales, statistical trend line analyses and adjustments for special features of the property and its location.

“We’ve got to use the most recent market data that is available to us,” said Pat Turner, an appraiser active in the Richmond, Va., area. “We can’t just make it up” to hit a contract price, Turner added.

Generally, appraisers perform valuations for lenders to help determine whether the collateral — the real estate securing the mortgage — is adequate. Prospective buyers typically receive a copy of the appraisal, but sellers do not. If it indicates they sold for less than the appraiser’s estimate of true market value, they are none the wiser. Nobody in the transaction has any incentive to break the news to them.

“It certainly puts us in an uncomfortable position when we find that the selling price is below market value,” said Karen J. Mann, a veteran appraiser in the Brentwood-Discovery Bay area east of San Francisco. “We wonder what’s going on out there. Are sellers giving in to the bottom feeders,” those who troll for hints of distress or urgency? Perhaps too much property has been sitting unsold, and some sellers are feeling time pressures.

It raises a fundamental question for sellers and buyers. What is true market value, anyway? One definition might be: It is whatever an arm’s-length, ratified contract says it is, adjusted downward for concessions or inducements the seller packed into the deal. For example, if a contract is for $250,000, but the seller is paying $10,000 of the buyer’s closing costs, the actual market value should be $240,000.

Another approach incorporates a time element and is used by corporate relocation specialists who resell the houses of executives transferred cross-country. Relocation firms often ask appraisers to do projections on what the property would sell for within specific time periods — 90 days, 60 days, etc. A house that might sell for $400,000 during a 120-day listing period might have to be priced lower to guarantee sale in a shorter time period.

Not all appraisers are surprised that appraisals are beginning to come in above contract prices. Gary Crabtree, president of Affiliated Appraisers in Bakersfield, said bloated sales prices over the last five years, plus hidden concessions and fraud, “have distorted the data” and the public records in some parts of the country.

“When mortgage fraud and concessions get built into” local recorded sales prices and tax assessments, he said, those inflated values “become the new comparables” that appraisers use. In effect, hard-bargaining buyers may be squeezing some of the fluff out of earlier sales.

Frank K. Gregoire, a longtime appraiser based in St. Petersburg, Fla., and chairman of the Florida Real Estate Appraisal Board, said that when the market is moving, appraisers “have to look not only at closed sales and current listings” but also tap into sources of dynamic information, such as realty agents who specialize in the micro-market where the property is located and who know how fast the inventory is building, where the concessions are buried and what’s motivating active buyers.

Sellers can protect themselves against low-ballers and vultures by hiring an experienced appraiser before listing. Though they rarely advertise it, many appraisers conduct independent appraisals for homeowners for modest fees. Top professionals often carry the “SRA” (senior residential appraiser) designation and can be located nationwide through the nonprofit Appraisal Institute, www.appraisalinstitute.org.

There are plenty of homes for sale, a record number nationally and perhaps an all-time high in your neighborhood as well. But apart from those folks who must move for one reason or another, there just aren’t many buyers. Even the looky-loos are staying away.

The reason is that people are afraid to dive in at a time when they think housing prices may be dropping. That’s why most would-be buyers have taken themselves out of the game until prices hit bottom, which could be a mistake for those who plan to stay in their new homes for quite a while.

The common wisdom is that if the house of your dreams comes along, go for it. After all, it may not be available six months from now. As long as you remain in the house, any further drop in prices will be offset by rising prices down the road.

“In all likelihood, you’ll make money in the long run,” said Bernie Markstein, a senior economist with the National Assn. of Home Builders. “So your best deal could be right now.”

That scenario notwithstanding, for most people, today’s situation raises the question: How do you know when prices have bottomed out?

It’s tough to know the precise moment when prices stop falling and start rising once again. It’s not even easy to spot a trend reversal. “If it was so easy to find the bottom,” Markstein said, “we’d all be millionaires.”

But there are telltale signs that smart buyers can look for, evidence that the housing market has finally firmed and is about to rebound. Every economist has his or her favorite indicators. For Lawrence Yun, senior economist at the National Assn. of Realtors, it’s jobs and rents. Job growth creates pent-up demand, and demand equals sales, Yun said. When apartment rents are rising, tenants are likely to become fed up and start looking to buy.

For Markstein, a key indicator is the incentives that builders are throwing at potential buyers. Once the giveaways start to dry up, he said, it’s a sure sign the market is beginning to turn.

Robert Campbell, publisher of the “Campbell Real Estate Timing Letter,” has five indicators on his list. He said the signals are accurate for the San Diego real estate market, where he is based and has tested his theories for 24 years. The indicators, he added, “should work” in just about any locale.

Campbell’s five “vital” signs:

* Existing home sales are perhaps his “most predictive” indicator. But it takes some legwork, because the number of homes sold in a given month is just a number. What you really want is a moving average, from month to month.

“You need to slow everything down by creating a 12-month moving average,” he says. “This takes the seasonality out of the equation.”

Add up the last 12 months’ sales — that’s local sales — and divide by 12. Do the same thing month by month and you’ll get an accurate reading of whether sales are slowing or increasing. When the pace begins to quicken, it means sellers are likely to start holding firm on their asking prices — or at least won’t be willing to come down as much.

Don’t confuse this signal with the average number of days on the market, Campbell warned. Although time on the market is “helpful,” it’s a stat that is too easily manipulated. After all, when a seller takes his house off the market for a while or switches agents, the clock resets at zero when it comes back on the market.

* Building permits are “an excellent leading indicator,” Campbell said. “No one reads a local market more accurately than builders. They have their fingers on the pulse of the market and adjust their businesses according to demand.”

When builders pull more permits in a month than they did the month before, then pull even more the next month, they think the market is improving and they want to be ready.

* Public information on mortgage defaults can be gathered from the local recorder’s office. If defaults are rising, it means lenders are still being loaded up with foreclosed properties, which have to be put on the market to compete with other sellers. And when there’s too much supply, prices tend to fall.

If the number of foreclosure filings is rising, it is a sure signal of prices headed down, Campbell said.

* Foreclosure sales are another indicator. The actual number of foreclosures is the number of filings minus the number of owners who have been able to bring their loans current, at least for the time being. Campbell calls it “a confirming number.”

“Lenders tend to dump foreclosures on the market at 10% to 20% below the rest of the market” so they can get rid of it quickly, he said.

* Mortgage rates aren’t so much a predictor as an “accelerator,” Campbell said. This signal doesn’t hold up very well right now because of the sub-prime mortgage-market meltdown. But normally, rising rates slow the housing market, and falling rates propel it.

The housing market will eventually turn around. It may be months or even years in a given locale, but it will turn. The trick is to know when it does before others do. Anyone following these five vital signs on a regular basis, Campbell said, “can nail the bottom pretty closely.”

A few days ago I was chatting with my longtime insurance agent. Among other things he mentioned some good news and some bad news about my homeowners insurance policy.

He said when my policy comes up for renewal in a few months, because of rising construction costs, he will recommend increasing my replacement cost coverage. That was the bad news.

But the good news, he said, is his company’s insurance rates per thousand dollars insured have come down due to lower losses in my area so the policy cost won’t increase so much after all.

I’ll wait until I get his bill to compare insurance costs with competitive insurers. Over the years, I’ve re-shopped for property insurance every few years to be certain I wasn’t paying too much and that I had adequate insurance for my home. Talking with two or three local insurance agents can be very enlightening.

Although I can usually save on premiums by insuring with a “no name” discount insurance company, I will probably stick with my present insurer because (1) I know where to find my insurance agent and (2) I don’t have confidence in lesser-known insurance companies without local agents.

SIX WAYS TO SAVE ON HOMEOWNERS INSURANCE. Smart homeowners know how to save on their homeowners insurance policies. Here are the primary ways to reduce your homeowners insurance premiums:

1. DON’T INSURE FOR THE AMOUNT OF THE MORTGAGE. Many homeowners blindly insure for the amount of their mortgage balance. The result can be either too much insurance coverage or not enough. The mortgage balance has absolutely nothing to do with how much insurance you need.

Over-insurance usually occurs when high land value (which won’t be destroyed in a fire) is included in the homeowners insurance policy. A better approach is to determine replacement construction costs for your type of house.

Interview at least three local insurance agents. They will be glad to measure your home’s square footage and recommend homeowners insurance coverage.

For example, suppose you have a 2,500-square-foot home and the three insurance agents you consult agree it would cost about $200 per square foot to rebuild your house if it burns to the ground. The result is your homeowners insurance policy should be for $500,000 even if comparable home sales in your neighborhood are around $700,000 including the land value.

Ask each agent about their guaranteed replacement-cost coverage. This policy provision will pay above your policy limit if a major loss occurs.

2. RAISE YOUR DEDUCTIBLE TO LOWER YOUR INSURANCE PREMIUM. If you can afford to pay for small claims yourself without involving the insurance company, raising your policy deductible from $500 to $1,000 will usually reduce your annual premium about 20 percent. If you can afford to raise the deductible to $2,000, your premium savings will be even greater.

3. LOWER YOUR LIABILITY COVERAGE, RAISE YOUR UMBRELLA POLICY COVERAGE. If you have a net worth of more than $500,000, it can pay to lower your homeowners insurance liability coverage and raise your umbrella liability insurance policy to $1 million or $2 million, perhaps more.

For example, several years ago my insurance agent recommended cutting my homeowners policy liability coverage to $300,000. That means if someone is injured on my property because I am negligent, the policy will pay up to $300,000 damages. If the person were seriously injured, then my umbrella insurance policy with the same insurance company takes over and pays up to its policy limit.

Umbrella insurance policies usually cost just a few hundred dollars for $1 million or more of liability coverage. These policies also provide automobile liability coverage if I should be at fault in an auto accident. Be sure to have all your insurance policies with the same company so, in the event of a loss, there is no arguing between insurers.

4. DON’T MAKE SMALL INSURANCE CLAIMS. In case you haven’t heard, some insurers are either nonrenewing or raising premiums for homeowners who file too many insurance claims. If you have a large claim, by all means file an insurance claim. However, if you have a modest loss slightly above your deductible amount, it’s often best not to file a claim and to pay the entire loss yourself.

The number and amount of claims can also be important when you sell your home. If you have filed many claims, your buyer might have difficulty purchasing homeowners insurance because the house is “loss prone.”

To check your home’s insurance loss records or the insurance claims filed on a house you are considering for purchase, on the Internet go to www.myfico.com and then look for the CLUE insurance claim section.

5. CARRY ACTUAL CASH VALUE PERSONAL PROPERTY COVERAGE. A controversial way to save on homeowners insurance personal property coverage is to insure for the depreciated actual cash value rather than the full replacement cost.

That means in the event of a covered loss, such as a fire or theft, the homeowners insurance company will pay only the depreciated cash value of the personal property. However, full replacement-cost coverage, which is more expensive, will pay the full cost of replacing the personal property at today’s prices.

If you have valuable “scheduled items” such as jewelry, furs, artwork and collections, the extra insurance premium can be substantial. It may pay to shop among other insurance companies for separate special coverage on these items.

6. ASK ABOUT MULTIPOLICY DISCOUNTS. Many insurance companies offer savings of 5 percent or more if you have two or more insurance policies, such as automobile and homeowners, with the same insurer. Also ask about other available discounts such as for burglar alarms, smoke detectors and dead-bolt locks.

UNDERSTAND BUILDING-CODE-COMPLIANCE COVERAGE. For a slight extra insurance premium, most homeowners insurance companies offer building-code-compliance coverage. This benefit pays, in the event of an insured loss, to upgrade to today’s building codes.

For example, if your home burns to the ground and you elect to rebuild, the local building codes probably require electrical circuit breakers (rather than fuses) and perhaps fire sprinklers too.

KNOW WHAT IS NOT INSURED. As many homeowners discovered in the last few years, homeowners insurance policies do not provide flood damage coverage. However, your insurance agent can arrange flood insurance. If you live in a designated flood area, your mortgage lender will require a flood policy.

Earthquake coverage is also an extra-cost coverage that is not included in standard homeowner insurance policies. In addition to the high-cost premiums, earthquake policies usually have large deductibles, typically 10 percent or more of the earthquake damage. For this reason, many homeowners living in earthquake areas elect not to purchase this expensive coverage.

CONCLUSION: As smart homeowners know, it pays to re-shop insurance policies every few years with two or three insurers to compare prices, coverages and service. Homeowners should consider the six key methods listed above to save on insurance premiums and, at the same time, improve policy coverages. Further details are available by consulting local insurance agents to compare their homeowner policies.