No, the difference is not distributed to the buyer. If this happens, congratulate yourself on being a good negotiator.
Any value above the purchase price goes into the buyer’s “back pocket” as home equity. Equity is the value in your house above what you owe on your mortgage.
The buyer will also not be able to borrow agains the additional value. Your loan-to-value (the percent you are borrowing…80% with a 20% down payment) is based on the lower of the sale price or the appraised value.
Down the road, when you sell your home or when you refinance your home, is when you will be able to take advantage of the additional equity.
In a word, no. If you have a contract to purchase a home, you might have a clause that allows you to renegotiate the deal if the appraisal is LOWER than the agreed sales price. For the purpose of a mortgage, property values are established by the sales price or appraised value, which ever is LOWER. So unless you signed a contract that binds you to pay more if the appraised value is higher than the agreed sales price, the fact that the appraisal came in higher has no obligation for you to pay more money. Same holds true for the buyer.
The sales price is the sales price. If the appraised value is more than you are paying, you have instant equity, but unless you plan on borrowing against that equity, there is no “difference” to be paid to anyone.
The general rule on all mortgages goes this way. The loan will be based on the price agreed upon in the purchase agreement or the appraisal value “WHICH EVER IS LESS”. In a way the difference does go to the buyer in terms of equity.
The best example that I can give is: Lets say you put in an offer to purchase a property at $100,000 and this offer is accepted. Then the appraiser values the property at $120,000. Your loan amount will still be based on the agreed purchase price of $100,000. Now, in a way the extra money does come to you in the terms of equity, because if you wanted to go and get a home equity line of credit you could. So in closing, the money doesn’t come to you in the form of a check. But you made a great buy and are walking into a home with 16.66% equity.