Whenever a property reaches a new high the buyer will most likely end up getting an appraisal whose value is less than the purchase price. This doesn't necessarily mean the buyer is overpaying, it does mean based on recent closed sales he's paying more than anyone else before him. An appraiser in determining value has to base their estimates based on closed transactions. If prices are rising, it becomes harder to bring in the purchase price the buyer has stated in the contract. The bank always limits the total loans on the property to the lower of appraised value or purchase price. So if you were buying for $1,000,000 and the appraisal came in at $975,000. The buyer would have to pay the difference - $25,000 in addition to their planned down payment and closing costs. However if this result was unanticipated (which it never should be), than the buyer may choose to renegotiate or drop the contract (assuming the appraisal contingency is still in place). This sort of situation was...