Why isn't anyone looking at my house?
Where are all the new listings?
What do you mean it appraised for $20k less?
Buyers think something is wrong with the home, due to Days On Market.
Buyers also believe they can make Low Ball Offers because of a huge price reduction.
The Sellers may miss out on Full Price Offers, purchasing the home they wanted, or disruption of a Move.
Even if the home gets a full price offer, chances are it won't appraise at that figure. That upsets Sellers and Buyers too. Some Sellers still want full price because of the offer. They want the Buyer to pay the difference. The Buyer realizes they are saving a lot of money on the home and usually say no to the Sellers. Hard feeling may arise. Normally the transaction will close Escrow, but at appraised value.
I could go on and on, but you see the challenges.