Home prices across the country have risen every month for nearly two-and-a-half years. Some gains are greater than others and of course all real estate is local so your area may not be enjoying the appreciation. Good news for sellers and not-so-good news for buyers.

And in some areas, the real brisk sales cause low appraisalsestate market is white-hot with home inventory shrinking to one or two months. That can lead to a bidding war as sellers not only get their list price but more in such markets. Sometimes though that can be a problem for both buyer and seller. Homes selling for more than the list price. How so?

Lenders base their loan amounts and down payment requirements on the lower of the sales price or appraised value. If the appraised value comes in higher than the sales price, the buyer probably got a pretty good deal. But if the opposite happens and the appraised value comes in lower than the sales price, the borrower must decide whether or not to pony up the additional funds.

For example, a real estate investor sees an offer on a single family home listed for $250,000. The bank requires a minimum $50,000 down payment. Now say the appraised value arrives at $235,000. The buyer must come in with the $50,000 plus the difference between $250,000 and $235,000 for a total of $65,000. Why would that happen?

An appraiser uses historical, recorded data on values. And if month to month to month home prices are rising it’s quite possible the appraiser can’t find a recorded sale that supports the higher prices being paid. In such an instance, the buyers must wait until a comparable sale is found that supports the contract price, renegotiate with the seller or walk away from the deal entirely. Brisk markets are better than slow markets, but there can indeed be a double-edged sword.