The appraiser should be well aware of the market conditions. If not, that may be one of your agruments. You can appeal the appraisal and it shouldn't take long. The FIRST thing you need to do is have your agent get the comps to justify the appraisal and get them to the lender. Otherwise, you need to do one of two things. I would pay for another appraisal if the lender will agree to it, or find another lender. While another lender may come back with the same value, at least you are fighting for the home and your deposit. Right now, don't concern yourself with PMI, that's not the issue.
Did you put a 3% deposit into escrow? Also, you said your agent went over comps with you, were they the same value as what you offered? You said close, how close?
Call me before you decide to throw in the towel, I might be able to help you protect your deposit. Anything would be better then losing your money, and the home.
I'm going to need to make a judgement call so stay with me. Because you mentioned SSF I'm going to assume that we are talking about a property in that City. If that's so then then the average price for a single family home is under $650,000 which would make the amount that you mentioned ($65,000) more than 10% of the value of the property in question. To get the Appraiser to come up 10% or more would be a very difficult task indeed.
The first option I would recommend is to appeal to the seller. If the Offer you made was non-contingent then it would be up to them if they wanted to amend the Purchase Contract and reduce the purchase price. The possibility that you would be responsible for the deficiency between the appraised value and the purchase price should have been discussed long ago with your agent.
Option #2 would be for you to pursue financing for the property. Lately my clients have moved away for FHA financing because of the high costs of Mortgage Insurance and have leaned towards get a 1st loan for say 80% and a 2nd loan for the remainder of the amount. The 2nd will be a little higher rate than the first loan but the monthly cost in the increased rate could be less than the monthly MI.
Option #3 would be to back out on the purchase and hopefully loose only 3% of the purchase price if
the Liquidated Damages clause was fully signed by all parties. Please understand that at this point I MUST advise you to talk to an attorney who deals with such matters.
I hope this helps and believe me, I do understand why you agreed to a non-contingent offer. It seems that in today's market those are the only offers that are being accepted in the Bay Area.
If the loan is conventional you can get another appraisal, have another appraiser rebuttal the appraisal, or go with a whole new lender with a different appraisal pool.
However, with that being said you would need the seller's blessing and have them give you an extension IN WRITING so you have more time.
If you have a NO CONTINGENCY offer you are bound to your offer. I am not sure if you have a Realtor but a no contingency offer sounds insane. I hope you have a clause some where in there to back out if need be.
You cannot contact the appraiser directly.
Your agent must provide the loan officer with additional comparables to support the value and a written rebuttal as to why they believe the value should be $65k higher.
Your agent can help you whether or not you can renogiate with the seller.
When you wrote the offer without contingenices, you pretty much said you did not care what the appraised value would be.
The good news is, you can look at the value in six months and refinance?
You, also, have the option of requesting a new appraisal (at your cost). Should that appraisal come in higher than the appraisal rebutted, you can use the new appraisal.
Should this appraisal come in lower...you will have to use the lower value.
Some general options though:
1) Get a copy of the appraisal and review carefully looking for mistakes. If you find any...let your bank know that!
2) Order a second appraisal (which unfortunatey you pay for)
3) Ask the seller if he/she will come down in price
I haven't heard of low appraisals since last year...market trends have been increasing so fast.
Hope tthese thoughts help!