So they were thrilled to receive back-to-back offers in the first week, and they accepted the first offer of $560,000, from an enthusiastic young couple buying their first home.

“Things were sailing through,” said David Mann, 65, a retired minister.

But just days before the sale was to close, an appraisal required by a new federal code came in $100,000 below the sale price, torpedoing the deal and sending the buyers and sellers into an emotional tailspin. It’s just one example of the turmoil this new rule — intended to prevent fraud — has caused: Appraisers say it is forcing many of them out of business while pushing up fees and derailing sales, all at a time when the real estate market can ill afford such problems.

The new rule, which took effect May 1, forbids brokers from hiring their own appraisers and requires intermediaries? — called appraisal management companies — to choose them instead.

The change was intended reduce the possibility that brokers and lenders would pressure appraisers to raise house values to match sale prices, regardless of the true value. It affects all loans backed by Fannie Mae and Freddie Mac.

The rule meant the Manns’ first appraisal, which came in at the full sales price and was conducted before the rule took effect, was invalid, and they needed a new one. The second appraiser, based in Oakland and sent by an appraisal management company, told the Manns’ agent he had never worked in San Jose. When his appraisal came in $100,000 below the offer price, the lender wouldn’t approve the buyers’ loan.

Buyers, sellers hit

“That’s when the drama began,” Mann said.

“There is something so wrong in all this,” said Georgie Huff, president of Capital Properties in downtown San Jose, who represented the Manns. “And a lot of qualified buyers and sellers are being victimized.”

No one is tracking the precise results of the new rule, but Bill Hillestad, strategic director of Think Big Work Small, which provides resources for the real estate industry and is pushing to have the rule repealed, says his research offers some clues.

In his online poll of industry professionals, about two-thirds of respondents said they had had at least one appraisal come in under the purchase price since the new rules took effect, with the average difference being more than $13,000. And 90 percent of respondents said they had lost at least one transaction.

Hillestad said the code has the potential to kill the country’s budding real estate recovery by depressing prices even more than the foreclosure crisis. If willing sellers and buyers agree on a price, the appraisal shouldn’t scuttle the deal, he said.

“We are exactly the kind of sale which our country needs in order to begin getting housing sales moving again,” Penny Mann wrote in a letter to the lender for the couple who wanted to buy their home.

As David Mann put it, the deal he struck “was a new stake in the ground to revive this neighborhood. We were damn well not going to give in.”

The new rule, called the Home Valuation Code of Conduct, is part of the settlement of a lawsuit filed by New York State Attorney General Andrew Cuomo, who had accused Washington Mutual of pressuring appraisers to inflate home values.

Accurate appraisals are necessary to prevent fraud in home sales and to protect lenders in case a loan holder defaults and the property has to be sold. Washington Mutual, however, was accused of inflating values to make more money on higher-priced loans.

While the intent was noble, the policy has had devastating consequences for some appraisers, many of whom have signed a petition (www.hvccpetition.com) to try to repeal the rule — a cause taken up by U.S. Rep. Gary Miller, a Southern California Republican who is co-sponsoring legislation asking for an 18-month moratorium.

A Santa Cruz appraiser who used to have about 10 jobs a month says she is now lucky to get just one, as the management companies change the way work is doled out. And instead of being paid between $350 and $500, she might get just $200. The management company pockets the difference.

“I’m sure there were a lot of crooked appraisals. But to put every appraiser basically out of business is not OK,” said the appraiser, who didn’t want her name used for fear that she would jeopardize future work. “After having my business for 20 years, I’m about to lose my house.”

Qing Jiang, a San Jose appraiser, said the new rule is also having a chilling effect as appraisers, “to protect themselves, to avoid being accused of pushing values up, are putting the value at the lower end. This will push the housing values down and have a huge effect.”

For traditional home sellers like the Manns — both retired clergy with the United Church of Christ — the rule nearly cost them their retirement. The couple were waiting to take a tour of their new Southern California bungalow, near their children and grandchildren, when their agent called with the news that the deal was unraveling because of the second appraisal.

“We postponed the tour for an hour,” Mann said, “and went to a neighborhood park and cried.”

Loan trouble

The buyers were equally devastated when their loan company balked at funding their mortgage. They had spent months looking for the perfect house, walking through at least 40 and viewing hundreds more online.

The Manns’ century-old Victorian on 15th Street was ideal for Michael Schlemmer, a 33-year-old Palo Alto lawyer, and his partner, Gui Alvarenga, a student. So the young lawyer was undeterred.

“I’m an educated person. “… I’ve lived in the Bay Area my whole life,” he said. “I had no question it was worth $560,000-plus. Neither did my agent or the mortgage broker or the first appraiser who approved it.”

Nor, as it turned out, did a third appraiser. After Huff insisted the management company send someone with a 408 area code, the value came in at the sales price. Early this month, after weeks of hand-wringing, the deal closed.

The two couples recently celebrated at the house. Schlemmer brought wine and flowers, and together they ate peaches from the backyard tree — just the way it should have been.