In this over-heated seller's market should successful buyers who get a 90% financing on a home that on the contract says $550,000 yet it appraises at only $500,000 get a break on mortgage insurance?

Of course the lender will go by the lower of either the appraised value or sales contract to avoid any problems. Meanwhile, the new homeowner has instant negative equity of 10%. However, the new homeowner has now raised the property value in the area for similar homes.

The new homeowner's neighbors with similar homes may now be able to refinance as they each gained some equity. So, who is in the dark here, the new homeowner or the appraiser? So far it appears to be the appraisers when final sales price are being justified by what the consumer pays.

But if the consumer supposedly overpaid by 10%, won't the existing homeowners who have a similar home still only appraise up to $500K give or take 2 to 3% with adjustments, if appraisers follow the data?

Surely, one or two sales cannot lift the home values that quickly by 10%, right? Well, just like CSI, the TV show, the appraiser has to follow the evidence (or sales data) to reach a conclusion.

In the short term (and possibly the long term), it appears the new neighbors with similar homes as the one recently sold will benefit and are now able to start the refinance process due to the added value from their new owner.