I am surprised at how often homeowners ask me if they need to get an appraisal before they put their home on the market. The answer is no. If the buyer borrows money to pay for the home the lender will order an appraisal.
The purpose of the appraisal is to make sure that the amount being borrowed does not exceed the value of the home. The house will be used as collateral.
Houses do not always appraise for the offer amount. Sometimes buyers offer an amount that is significantly over the asking price with a small downpayment. If the house doesn’t appraise for enough the buyers may have to come up with more cash or the sellers will have to reduce the sale price.
As a home seller, I would want to see something in the offer that is for more than the asking price stating that the buyer will buy the home anyway and that the buyer has the cash to make up the difference.
If not it might make more sense to accept a lower offer because it is more likely to work out. In most cases people who have to put their home back on the market because an offer fell through end up getting less for it.
Most of the time I have an idea of what a home will appraise for. That helps with negotiations when there are multiple offers.
The way the appraisal process works is that an appraiser visits the property and looks it over. The price he/she (they are mostly men) comes up with is based on the actual sale price of three similar properties in the immediate area that have sold in the last year.
There are houses that are hard to appraise because it is hard to find comps. Appraisers can compare to properties and make adjustments. It isn’t an exact science.
On average for the Month of May 2018 St. Paul home sellers got more than 100% of the asking price. That does not mean that all homeowners got more than the asking price. If the property is overpriced sellers may get offers for less than the asking price or no offers at all.
The lender will not use a recent appraisal that the owner had done. They will always get a new appraisal and the borrower will have to pay for it. With cash sales, anything goes.