Hmm, the kicker in the last letter is the word "Correctly".
The one in the letter before last was the idea of "overpriced for the market area"
The first letter seems to me, to be the most specifically correct. He is local and experienced.
But to answer your questions,
a) Will the Appraisal undervalue our house; the answer is "No ".
b) Should you be worried? Be afraid, be very afraid.
How can both answers be correct? Because, by definition, an appraisal DEFINES the value of your home. If the appraisal is lower than the contract price, then, by the professional opinion of the appraiser, the property was "overpriced for the market area". The better question would have been, "Will the appraisal come in for the value of the contract?" That's trickier, and much, much harder.
Congress passed some new laws to prevent fraud in the mortgage industry (desperately needed reforms.) They were intended to prevent collusion between lenders (particularly mortgage brokers) and appraisers; as well as stabilize the volatility of the market. Some of the rules they passed seem to have unintended consequences, as implemented.
One of the rules is that there can no longer be communication between the loan originator and the appraiser. The implementation is that lenders now have to go through a "Appraiser Agency", i.e., a bucket shop approach. The loan office calls the appraisal agency and defines the property and the price they will offer for the appraisal; the Appraisal agency uses some internal process to pick an appraiser for the job, a qualified appraiser (at least on paper.)
We have seen, recently, however, a greatly increased number of appraisers from far outside the subject area being called in to do the appraisal. These non-locals seem unaware of both the absolute value of the area to a property (often a few blocks, or crossing a significant dividing road can significantly affect value.) AND the relative value of urban amenities (such as the greater significance of parking, location in a Historic District, or even style). I believe the best value determination is by someone who is intimately familiar with the area, the subject property, and the comparables.
In addition, the rules for FHA loans reduce the value of basement amenities & additions, regardless of how valuable a buyer might find a basement guest room, extra storage, full bath, or even unit. You may receive some credit, but not as much value as the market might indicate.
Another issue is that FHA loans only use comparables for the last 90 days, which, particularly in my area, which is very seasonable, with the 'Summer Doldrums' affecting value substantially. The sales from 2009 will not be considered except as historic data, I believe.
Another trouble is that FHA loans use short sales, foreclosures and other criteria, with what seem, to me, to be minimal adjustments. If there are nearby, recent foreclosures or short sales for similar properties, and no conventional sales to override them, then those will be used, in fact, by law, must be used, I've been told.
Another concern is that an FHA appraisal is locked in for, I believe 6 months; i.e. a low appraisal cannot be replaced by an appraisal (higher or lower) with more recent comparables, even though there may be completely different, higher (or lower) comps in those last 6 months. You CAN appeal the appraisal, but, even if successful, the appraisal is sent to the SAME Appraiser for reconsideration. I believe that the appraiser has nothing to gain, and much to lose if he agrees that his original appraisal was flawed.
So, should you be worried? Probably.
Is there anything you can do? Probably not
We try to make sure that we use small, local lenders, who use a smaller 'Bucket Shop' and often know who is in that stable of appraisers, even if not the particular appraiser per case, and can determine whether they are actually experienced in the subject area. But, we are in for some dicey times until someone smarter than I figures out a better way to implement rules that both prevent fraud and more accurately reflect market value for a home than the current one.