They can stay on the market and hope that there is a buyer out there that is willing to pay that much over appraisal with cash.
It could be your lender. Some lender's pool of appraisers evaluate much less.
In this market of low inventory it is not that uncommon for houses to go $100K over list.
I recently bid $80K over list on a house for myself but I knew it would appraise.
There is a huge difference between a 300,000 listing appraising out for 200,000.... and a 1.2 million dollar house appraising for 1.1
But - the list price is irrelevant.
You ask...........Is it common for a house to appraise out for less than the list price?
Yes, it happens.....but that's not the real issue....more importantly, does it appraise out for the SALE price.No one cares about the appraisal vs the list price.............unless it sells for full asking.
Finally, if the house doesn't appraise out for the agreed-to sale price, most likely the buyer will not be approved for the loan (especially if there is a "satisfactory appraisal" contingency in the contract)