Carrie's comment: "the lender will not lend more than appraised value."
Well, not anymore, it they are a publicly held or government insured lender. Remember those days when they were actually advertising, get a loan for 125% of your appraised value? But there are still people out there with cash and there are private investors.
Okay Rusk, because you are a home BUYER and this is your first question, I'm guessing that you are looking for some assurances that you don't get ripped off. If the seller, you and the lender all hired different appraisers, you could get 3 very different values or you could get 3 reports all saying the value is the contract price. Before you buy, look at homes and guess whether you think they are under priced or over priced. Then a month later see if any of them are "under contract". Chances are, if you thought it was over priced, so did everyone else and it will sit on the market for a long time. If you are good at guessing the under priced homes, then you will have nothing to worry about. A Realtor looks at homes everyday and can get a good feel for this as well. Hire a good one and ask their advice. Then before you are ready to make an offer, have the agent pull up comps and "prove" that you are making a reasonable offer for the home.
Here are a few other scenarios other than a seller's market. The house and land is only worth $100,000. But if the buyer can buy the neighbors home and land too, the land would be large enough to build the McMansion he wants. Vacant lots in a less desirable location of that size sell for $300,000. The buyer would be willing to pay higher than the appraised value.
The buyer wants to change the zoning and turn the home into a Bed & Breakfast or coffee house. Until the zoning is changed, the house only appraises for $100,000. If the zoning change is successful, the value of the home would be $500,000.
A buyer finds out that the home he grew up in as a child and always wanted to buy when he grew up went up for sale. But someone already has a contract to buy it. He offers the pending buyer $10,000 above the appraised price to buy out his contract.
Anyway, just some food for thought.