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It is a supply and demand problem. Your house is only worth what someone will pay for it. If the potential buyers have several cheaper foreclosed homes to buy instead of your home, the potential sale price of your home will go down

The banks use "comps" to figure out the maximum loan value. Assuming the housing nearby as similar, their actual sale price provides the price signals markets crave.

Comps have nothing to do with loan value. Your income, credit, and assets and debt decide what your max loan value is.

Well, my response was to a statement that has been edited :/

your financing can be denied if the house doesn't appraise, depending on your deal with your lender

And while the appraisal is supposed to be independent, the appraiser knows the contracted sale price of the house at the time of the appraisal.

Because the market is flooded with similar houses for cheaper.