A market is not always rational. Which is fine, we deal with the market as it is. However, each individual MV purpose appraisal assignment means we analyze a sale or pending price for the condition and terms in the MV definition. They dont' always match an individual buyer or seller's motivations. If selling over list price is typical, no problem. Question still remains, is this price for subject MV or not? Buyers are under no obligation to purchase at MV. Appraisers are under an obligation to appraise for MV. )
RE agents realize that an appraisal market value opinion can differ from a price - thus RE agents put in clause in some contracts if appraisal value is below SC price, buyer agrees to pay up to $ 20,000 (for example ) over appraisal value up to teh price , or buyer agrees to pay the price regardless of appraisal.
Buyers in a tight inventory market do not always make rational decisions, nor sellers in a over supply market . Fine, do their thing ,and price trends go up or down accordingly.
As for buyers knowingly paying above MV, some sign clauses they are willing to do just that. They have enough cash to put in that they don't' care. Maybe they just sold their old house for a high price. RE feeds on itself. Other buyers are not as well informed as they think, the RE agents shows them superior comps and convinces them the subject is worth X crazy price . Other buyers are caught in a squeeze of high rentals and their purchase decision centers around mortgage payment rather than price.
