One of the most confusing moments in a transaction is when a home sells for one price, but the appraisal comes in at another. It can feel frustrating, but the two numbers are answering different questions, and understanding that difference helps everyone stay calm and make better decisions.

Appraisal value is an opinion of value from a licensed appraiser, usually ordered by the lender. The appraiser looks at recent comparable sales, the home's condition, size, features, and location, and applies adjustments to reach a supported value. The lender uses it to manage risk: it wants to be confident the property is worth enough to support the loan if it ever had to sell it.

Market value, by contrast, is simpler in concept and messier in practice. It is what a ready, willing, and able buyer will pay for a home at a given time. That price is shaped by demand, competition, how many similar homes are available, the terms of the offer, interest rates, and timing. In a competitive week, urgency and a strong offer can push a price above recent comparable sales. In a slower market, a home may sell below what a seller hoped, even if it is well kept.

That is why the two can differ. An appraisal looks backward at closed sales, while market value reflects what buyers are doing right now. A unique home, a fast-moving market, or a property that needs work can widen the gap.

So what should you do when they differ? Buyers should talk with their lender and agent about options such as renegotiating, bringing additional funds to closing, challenging the appraisal with better comparable sales, or, if the contract allows, walking away. Sellers should price with recent comparable sales in mind, not just hope, and be ready for a second conversation if the appraisal is low. Investors should underwrite to the more conservative number and avoid letting one optimistic sale drive the whole deal.

Have you ever had an appraisal come in above or below the contract price, and what helped you move the deal forward?