Parker Jones has been appraising homes in San Francisco for 25 years, and he’s watching something wild happen right now: single-family home prices are jumping 20% in just a few months. That’s not just wild for the market, it’s making his job legitimately harder.

Here’s the problem: when you get a mortgage, the bank needs an appraiser to confirm that the property is actually worth what you’re paying for it. But when prices are skyrocketing this fast, there’s barely any data to back up those higher sale prices. Jones has to get creative, reaching out to real estate agents about pending nearby sales just to find enough comparable properties to justify the numbers. “Sometimes there is just zero data to work with”, he admits.

When an appraisal comes in lower than the agreed-upon sale price, things get messy. Either the seller drops their asking price, or the buyer needs to throw in more cash to make up the difference. Some buyers just bail on their deposits rather than swallow a six-figure gap, which is why we’re seeing cash offers become even more dominant in the Bay Area right now.

Ruth Krishnan, a Compass real estate agent, is working with a buyer who has $3 million to spend on a Pacific Heights condo. This person has solid credit and pre-approval. But they’ve already lost to all-cash offers twice. Some buyers are getting creative by taking loans against other assets just so they can make all-cash offers, then refinancing into traditional mortgages after closing.

The real issue is that when appraisals fall short, it’s not just an inconvenience, it can tank a deal. Krishnan recalls one property where the appraisal came in $150,000 lower than the contract price. The buyers had the money, but they’d planned to use it for renovations. They walked away from their $50,000 deposit rather than move into a home they couldn’t afford to update.

What’s keeping appraisers from being completely blind-sided by market shifts is local knowledge. Jones emphasizes that having an appraiser who’s actively connected to Bay Area agents, understanding the behind-the-scenes details of bidding wars and close offers, makes a huge difference. “If you are not reaching out to understand from a Realtor what’s happening in the market, you can be blinded”, he says.

The good news? This chaos is probably temporary. As the spring market progresses, more sales at higher price points will happen, giving banks the five comparable sales they typically need to feel comfortable. By May, appraisals should stop being such a headache. Higher interest rates and global uncertainty around the Iran conflict could also pump the brakes on endless price growth, even with all those expected AI millionaires moving to SF.

For now, real estate agents are telling buyers to prepare mentally for appraisal disappointments. “It’s going to feel like shit, so just get ready”, as one agent puts it. If you’re not planning to pay all cash, understanding this risk upfront could save you a lot of heartbreak.