Sellers today must be prepared to deal with appraisals which can be lower than the negotiated purchase price. In fact, I am hearing that FHA is requiring two appraisals be done on jumbo FHA LOANS . While everyone is sitting on pins and needles, it is important we agents discuss the problems of appraisal contingencies to both buyers and sellers before we even begin negotiating.
One agent I know found out the hard way. She represented the seller. They were so elated to have received an offer for the full list price. Nervously they awaited the appraisal to come in. Alas, it did and it appraised for the contract price. Unfortunately, this was an FHA loan and a second appraisal was required.
Appraisers can factor a declining market into their appraisal.
Our Virginia contract has language addressing the purchase price and appraised price. If this happens, a seller can lower the sales price, the buyer can bring funds to the table to make up the difference, or the buyer and seller can split the difference in whichever way feel is equitable, or the contract can be void.
In the long run, it is far better to have done the research and have an asking price which is in line with market values. Because many homes are located in declining markets, it is difficult to keep up with valuations. Each week,
I touch base with my sellers, calling 
& sending the most recent solds, just to keep them in tune with what is happening. I meet to re-evaluate the listing and make changes to the price, if need be. If your agent is not on top and doing his homework, you set yourself up for low ball offers and low appraisals.
You can't always believe the listing agent's list price; some agents just list for what the sellers want, just to get the listing. A few years a go, you might have gotten the deal done, but today is another story and another market. Appraisers would have made the deal work, but today they are just too scared and under new rules.
Negotiating after a low appraisal can be tricky. 
Recently, during my listing presentation, a seller had an appraisal which was $40,000-$50,000 over what my comps indicated. That appraisal had been done several months before. I was not able to speak to the appraiser, and am not sure if he used homes in the immediate area and how he had come up with this value. My comps were around the suggested list price of other agents the seller had interviewed.
I knew this was going to be a difficult listing and knew that this home was a unique property, one that was not in a subdivision, not a cookie-cutter home, and one which had some of the most spectacular views in Loudoun County. What price can you put on views and how will this add to the price? That is why I always try to make sure that my sellers realize value is in the eyes of the buyer. The buyer determines the price, not the seller, not the agent. If the buyer has enough cash and he is willing to disregard an appraisal, the seller will not need to be so concerned. That is only apparant after you find the perfect buyer!!
Today's market conditions require you think clearly, do the homework on recent solds, and understand that appraised values need to always be considered. Unless you have a buyer who is willing to pay more than the property is worth, not too many of those people out there, the offer will need to be re-negotiated.
My client's objectives were to sell quickly, for the most money, and to do this before the winter season kicks in. He got his price and GOT IT SOLD within a week.
One more piece of the puzzle- the buyers had a desk-top appraisal done since they had a large down payment. The desk-top appraisal was extremely low. We therefore supplied a copy of the first appraisal my seller had done. Both the seller and buyer felt they made out fine and both are happy. Winning solutions to a win win situation.
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