QI am considering buying a house and the real estate broker has presented me with a form contract to sign. I am concerned that I may be acting emotionally, rather than rationally. How do I determine the value of the house? I have a nagging feeling that I may be paying too much for this property, but do not know how to solve this problem.

ADetermining the value of a piece of real estate is perhaps the hardest issue facing prospective homeowners, whether they are first-time buyers or experienced professionals.

Mortgage lenders face this problem, too. No lender wants to make a loan that will not be repaid, or -- in the event the lender has to foreclose -- will not command the full value of the mortgage.

For example, if a lender makes a mortgage loan of $300,000, it wants to be absolutely certain that the house that is the security for the loan is worth at least that much. In fact, most lenders want their borrowers to put up some money when a loan is made. Typically, a borrower must pay at least 5 percent of the purchase price, and the lender will advance the rest. There are, of course, many different kinds of loans, including some in which the lender will lend 100 percent of the price.

No matter the type of loan, though, the lender will always require that the home be appraised by a professional appraiser. This is a person who is trained to evaluate what a property is worth; states regulate and license appraisers.

An appraiser looks at many variables, including the condition and location of the property. The appraiser also relies heavily on comparables, which are the recent selling prices of similar properties. Clearly, if a similar (or even identical) property down the street sold for $225,000, the house you are considering may not be worth $325,000.

However, when the appraiser physically inspects your potential home, he may find that it is not really comparable to the other houses on the block. For instance, it may have many extras -- a new kitchen, a swimming pool, several fireplaces, etc.

The appraiser submits a written report to your lender. If the appraised value meets the lender's criteria -- and assuming you meet the lender's financial and other standards -- the lender will commit to a loan.

Appraisals, however, are not based on any scientific formula; they clearly are subjective. It is often said that the best test to determine the value of a house is what a willing buyer is prepared to pay and a willing seller is prepared to accept.

And while appraisals are, in my opinion, more art than science, they are perhaps the only way to determine if you are paying too much for your house. But here are some points you should consider before you sign that real estate contract:

* Make sure that your contract is contingent on you obtaining the necessary financing. In recent years, too many real estate contracts have been signed in haste -- and without this contingency.

Why is this important? Look at this example. You sign a contract to buy a house for $300,000. You expect to get a conventional loan of $240,000 (80 percent) and will put up the difference ($60,000) with your own money. However, the appraisal that your lender receives indicates that the house is only worth $285,000. Your lender will still lend you 80 percent of the value, but now the loan amount will only be $228,000.

But because you are legally obligated to pay the full $300,000 for the property, you will now have to come up with $72,000 -- or $12,000 more than you originally planned to pay. While you may have this money, you certainly did not anticipate the additional expense. And, more significantly, you may not have this extra money, and may be in breach of your contract and lose your earnest money deposit if you cannot go to settlement. With a financing contingency, however, you can legally back out of the contract without losing your deposit.

If the sellers or real estate agent tell you they will not accept such a contingency, my suggestion: Go somewhere else.

* Include a provision in your contact that if the house appraises for less than the contract price, you will have three alternatives: you cancel the contract and get your earnest money deposit immediately refunded; you pay the full price regardless of the appraised value; or the seller will reduce the price to the amount of the appraisal.

In the past two years, values in many parts of the country have skyrocketed -- but your house may not be as valuable as you think it is. Why take a chance that the appraisal will be low? Keep in mind that legitimate lenders encourage their appraisers to be conservative. The lender wants to be sure that it will not lose money.

If you follow these suggestions, they may give you the peace of mind of knowing that you did not overpay for your dream house.

Should you get your own appraisal before you sign a contract? That's a good question without a good answer. First, you probably don't have time to arrange to have the house appraised before you sign a real estate contract. Most lenders, in any event, will insist on using an appraiser on their own list. If you do have time to get an appraisal, make sure that you obtain an appraiser's name from your lender. Otherwise, you will have to pay for two appraisals.

If you ultimately buy this house, do not forget to ask your lender for a copy of the appraisal. You have the absolute right to get a copy, if you request it in writing.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.