The Home I’m Buying Didn’t Appraise: Now What?
If you are buying or selling a home and dealing with a low appraisal, it can feel like the deal is falling apart. A low appraisal is one of the most common hurdles in a real estate transaction, especially when pricing moves faster than recent comparable sales support.
A low appraisal doesn’t automatically kill a deal, but it does require a strategy to move forward.
The good news is that a low appraisal does not automatically mean the contract is dead. Buyers and sellers usually have several options to keep the deal together, renegotiate the terms, or move on depending on the contract and the circumstances.
What Does a Low Appraisal Mean?
A home appraisal is an independent opinion of value completed for the buyer’s lender. If the appraised value comes in lower than the agreed purchase price, the lender will base the loan on the lower amount, not the contract price.
For example, if a home is under contract for $600,000 but appraises for $575,000, the lender will typically loan based on the $575,000 value. This creates what is known as an appraisal gap, also referred to as an appraisal shortfall. For a deeper look at how appraisal gaps work and what options buyers and sellers have, see what is an appraisal gap.
For a complete breakdown of how appraisals work, what affects value, and how to prepare, review this home appraisal guide.
6 Possible Outcomes When a Home Doesn’t Appraise
- Reduce the purchase price
- Buyer pays the appraisal gap
- Buyer and seller split the difference
- Cancel the contract (if contingency applies)
- Request a reconsideration of value (ROV)
- Try another lender or appraisal (if feasible)
Why Appraisals Can Vary
Many buyers and sellers assume an appraisal is an exact science, but there can be some variation. Two appraisers with the same real estate appraisal license may evaluate the same property and arrive at different values.
Appraisers may choose different comparable sales, make different adjustments, or interpret market conditions differently. For example, one appraiser may adjust $25,000 for a private pool, while another may only adjust $10,000. Differences in comparable sale selection, property condition analysis, and market interpretation are often bigger factors than most buyers and sellers expect.
There are also situations where a home has strong comparable sales and still comes in low, while another property with limited supporting data may appraise at value. Because of this, buyers and sellers should understand there are no guarantees when it comes to a home appraising.
What Happens Next If the Appraisal Comes in Low?
Once the appraisal comes in below the contract price, also referred to as an appraisal shortfall, the buyer, seller, agents, and lender usually review the options right away.
Timing matters, as most contracts include deadlines for appraisal-related decisions.
The next steps often depend on the size of the gap, the contract terms, the buyer’s available cash, and how motivated both sides are to keep the transaction together.
In many cases, the deal can still move forward. A low appraisal is often a negotiation issue, not a deal breaker. It is essential that all parties remain calm and assess the best course of action.
Options for Buyers When a Home Doesn’t Appraise
1. Renegotiate the Purchase Price
The most common solution is for the buyer to request a price reduction. In many cases, sellers are willing to adjust the price to reflect the appraised value, especially if the market has shifted or there are limited backup offers.
2. Pay the Difference Out of Pocket
If the buyer still wants the home and has the financial ability, they can cover the appraisal gap with additional cash. This is more common in competitive markets or when buyers feel strongly about the property.
3. Split the Difference
Buyers and sellers sometimes meet in the middle, with each side absorbing part of the gap to keep the transaction moving forward.
4. Cancel the Contract if the Appraisal Contingency Applies
If the contract includes an appraisal contingency, the buyer may be able to cancel the contract and recover their deposit without penalty.
5. Request a Reconsideration of Value
If the appraisal appears to contain factual errors or overlooks stronger comparable sales, the buyer can ask the lender to submit a Reconsideration of Value (ROV). The request usually includes corrected facts, better comps, or additional information about the home.
An ROV does not guarantee a higher value, but it is often worth exploring before walking away from the deal.
6. Explore a Second Appraisal
In some situations, a second appraisal may be possible, usually through a different lender if the transaction timeline allows. This is not always practical and it can create delays, extra costs, and the possibility of a similar result. Buyers should discuss this carefully with their lender and agent before making a move.
7. Include an Appraisal Gap Coverage Clause in Your Offer
Some buyers strengthen their offer by committing to cover a specific portion of the appraisal gap, such as $15,000 to $30,000 above the appraised value. This can make an offer more competitive while still limiting financial exposure.
Options for Sellers When the Appraisal Comes in Low
1. Reduce the Price
Lowering the price to match the appraised value is often the quickest way to keep the deal intact and avoid going back on the market.
2. Negotiate with the Buyer
Many sellers negotiate a compromise where both parties share the difference.
3. Support a Reconsideration of Value
Sellers can work with the buyer’s agent to provide better comparable sales, a list of upgrades, corrected property details, or unique features that may not have been fully considered. This information is typically submitted through the lender as part of a reconsideration of value request.
4. Relist the Property
If an agreement cannot be reached, the seller can put the home back on the market once both parties sign a cancellation agreement. However, future buyers may run into the same appraisal issue depending on the price point and comparable sales.
What If the Buyer Is Paying Cash?
A low appraisal usually creates the biggest challenge when financing is involved. Cash buyers are not required to follow lender appraisal requirements and may choose to proceed even if the appraised value comes in below the contract price. That said, a low appraisal on a cash purchase can still influence negotiations if the buyer uses it as a basis to renegotiate the price.
Can a Buyer Cancel the Contract Due to a Low Appraisal?
In many cases, yes, but it depends on the contract terms.
If the buyer included an appraisal contingency, they typically have the right to cancel the contract without losing their escrow deposit if the home does not appraise at or above the purchase price.
Appraisal contingency protections vary by contract and location. Buyers should review their contract carefully to understand their rights if the home appraises below the purchase price. Working with an experienced real estate agent before signing is the best way to make sure the right protections are in place.
What If There Is No Appraisal Contingency?
If there is no appraisal contingency, the buyer may still ask the seller to reduce the price or work toward another solution, but the buyer has less protection. Depending on the contract terms, walking away could put the buyer’s deposit at risk.
This is one reason buyers should understand their financing and appraisal terms before making an offer, especially in markets where bidding wars or fast-moving prices can create appraisal gaps.
Why Low Appraisals Can Happen
Low appraisals most commonly occur when contract prices move faster than recent comparable sales can support. This can happen in competitive markets, shifting market conditions, or when a home has unique features that are difficult to match with nearby sales.
Common reasons include:
- Homes receiving multiple offers and selling above recent comparable sales
- Market conditions shifting while pricing is still adjusting
- Unique property features that are difficult to value with standard comps
- Improvements or lot characteristics not fully reflected in nearby recent sales
Accurate pricing from the beginning matters, especially for sellers who want to avoid delays, renegotiation, or a failed transaction. If you are preparing to sell, you can start by getting an estimate of your property’s value on the What’s My Home Worth page.
How Buyers and Sellers Can Reduce the Risk of Appraisal Problems
Not every appraisal issue can be avoided, but there are practical steps that can lower the risk.
For Sellers
- Price the home based on recent, relevant comparable sales using a CMA or appraisal
- Complete minor repairs before the appraisal when possible
- Make sure the home is clean, accessible, and presentable
- Prepare a list of upgrades and improvements with dates if available
- Share relevant property details through the agent, including updates, lot premiums, or unique features
For Buyers
- Avoid offering far above market support unless prepared to cover a gap
- Review appraisal and financing contingencies carefully before signing
- Discuss appraisal risks with your agent in competitive offer situations
- Understand how much additional cash is realistically available if needed
A Simple Example of a Low Appraisal Scenario
Imagine a home goes under contract for $650,000 but the appraisal comes in at $620,000. The lender will usually base the loan on the $620,000 appraised value, not the higher contract price.
At that point, the buyer and seller may decide to renegotiate the purchase price, split the $30,000 gap, have the buyer bring in extra cash, submit a reconsideration of value request, or cancel the deal if the contract allows.
Final Thoughts
A low appraisal can be frustrating, but it does not automatically end a real estate transaction. Most appraisal issues are resolved through negotiation, additional cash from the buyer, a price adjustment, or another mutually acceptable solution.
This article is meant to provide general guidance for buyers and sellers navigating appraisal challenges. If you are currently under contract, work directly with your real estate agent and lender to determine the best course of action for your specific situation.
Frequently Asked Questions
Does a low appraisal always mean the deal falls apart?
No. Many deals continue after renegotiation, a price reduction, an appraisal gap contribution, or another solution that works for both parties.
Can the appraisal be changed?
Sometimes. A reconsideration of value can be requested through the lender if there are errors or stronger comparable sales, but outcomes are never guaranteed.
Who pays the appraisal gap?
It depends on the agreement between buyer and seller. The buyer, seller, or both may end up covering the difference.
Are low appraisals common?
They can happen in competitive or shifting markets, especially when homes are unique or sell above the range of recent comparable sales.
What if there is no appraisal contingency?
The buyer may still try to negotiate, but the contract may not allow them to cancel without consequences. This can put the escrow deposit at risk.
Can a seller refuse to lower the price after a low appraisal?
Yes. A seller is not required to reduce the price. However, refusing may cause the deal to fall through unless the buyer covers the difference or another agreement is reached.
Will the next buyer’s appraisal come in low too?
Not necessarily. A different appraiser may select different comparable sales or market conditions may have changed. However, if the home is priced above what recent sales support, future appraisals could face similar challenges.
Can I get my appraisal fee refunded if the home appraises low?
Usually not. The appraisal fee pays for the appraiser’s work regardless of the final value conclusion.
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About the Author
Top Wellington Realtor, Michelle Gibson, wrote: “The Home I’m Buying Didn’t Appraise: Now What?”
Michelle has been specializing in residential real estate since 2001 throughout Wellington, Florida, and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.
