Should I pay $20k over the appraisal value

[Alec Jacobs]

Hello everyone, I have a weird scenario that I have been really wrestling with lately.

I am in the middle of buying a home and the appraisal came back $40k under my offer. The seller said they would come down $20k and initially I was pretty happy. The deal penciled in at my initial offer and now it pencils even better. But just because it pencils in $20k above its value doesn't mean I should buy it that high right? 

I know people pay over the appraisal in competitive markets but my situation is not ordinary. My agent gave me first dibs with this property since she works with the seller so I wasn't bidding against anyone else. I am new as well so I don't know how competitive the market is but I doubt that anyone would pay that much over appraisal. But, regardless of speculation, I believe there is no reason to overpay $20k on a property's appraised value unless it's absolutely necessary. The market I am in is Beaver County, specifically Ambridge, and again I am new and do not know the market well and maybe homes are being bought for more than they're worth but from what I've seen I don't think so.

I have been going back and forth with this for a while and I should've posted sooner but any insight would be awesome. I know there is probably not a 100% right choice but paying $20k over without having to seems illogical in general and I would like to know everyone's thoughts.

Thank you so much!