How do appraisals work when offers are over list price?

When an offer exceeds list price, the appraisal still reflects the appraiser's independent opinion of market value based on recent comparable sales. If the appraisal comes in below the purchase price, the lender will only finance based on the appraised value, not the contract price. The buyer would then need to cover the difference in cash, renegotiate the price with the seller, or sometimes cancel under the appraisal contingency if included in the contract. In competitive markets, some buyers waive the appraisal contingency, but that means they're committed to covering any gap out of pocket.