But a salesman does care what the house is. Unlike the sale price, the appraised value of the home may not be what sellers ask for their home. Lenders will only allow a loan amount based on the value of the home on the appraisal report. The appraiser will give an informed opinion on the value of the home based on training and experience.
If the appraiser is good at what they do, the price will usually be close to the market value of the home, but not always. The appraiser will most likely know the selling price of a home. Why? Because standard appraisal forms require the appraiser to enter the information, the appraiser will have a copy of the purchase agreement. Therefore, the appraiser will most likely know the selling price of a home, but this is not always the case.
The contingency clause in your purchase agreement means you can get away from a low home appraisal without losing money. As you can imagine, the seller's best bet is to try to price the home for a value that matches the sale price. In addition, I worked at a residential real estate appraisal management company in the appraisal review department for almost two years. Some appraisers are so afraid that their integrity will be questioned that they will never evaluate a property equal to the contract price.
If the house doesn't evaluate the amount you agreed to pay, sometimes leaving is the smartest and safest thing you can do. I followed their instructions for at least six or eight months until the time I started my appraiser training courses and I was promoted to Appraisal Review Manager. If the buyer included an appraisal contingency in their offer, they can exit the deal with the bond intact if the valuation falls below the contract price. The post-contract valuation was, on average, 4.2% higher than the pre-contract valuation for the same property.
Therefore, it can be quite frustrating to discover that the bank will not lend the buyer more money than is estimated in the house. For me, that's why the appraiser should not see the contract, he is supposed to be the expert, make the assessment based on what is being sold and not on the pending sale of the house in question. The appraisers helped us get into this real estate mess (I know, you won't believe it for a second), by vastly overvaluing homes and jumping values from one house to another with crazy percentages. In your second paragraph, you call “ignorant” those who would dare to challenge an appraiser to perform the appraisal without the benefit of a copy of the sales contract.
If an appraiser is new and lacks experience writing a property appraisal like yours, it could result in a low valuation.