When searching for a home, buyers have to contend with various situations. Aside from coping with overpriced housing markets and multiple bidders, buyers must also avoid the temptation of falling in love with a particular home. When the latter occurs, many buyers are willing to submit an offer for more than the list price in an attempt to win the bid. While this tactic will likely result in a winning bid, securing finances may pose another problem.

Before closing on a home loan, mortgage lenders will require a home appraisal. In most cases, home appraisals come in at or higher than the purchase price, in which the lender will provide funding. On rare instances, the appraisal amount will be lower than the sale price.

If the home appraisal is significantly lower than the sale price, and the buyer is adamant about buying the home, he has the option of paying the difference out-of-pocket. On the other hand, if the borrower does not have the cash on hand to pay the difference, the seller must either agree to lower the sale price, or the borrower is forced to walk away from the deal.

Sellers who obtain multiple bids on a property have negotiating power. For example, let's say three buyers bid on a property and the appraisal comes in low. Before agreeing to lower the sale price, the seller could contact all bidders and determine if one of the buyers is willing to pay the difference from their cash reserve. In a seller's market, this scenario is likely to occur. On the other hand, if selling in a buyer's market, reducing the sale price of the home is a more realistic option for home sellers.