The Home I’m Buying Didn’t Appraise, Now What?

The Home I’m Buying Didn’t Appraise, Now What?

One of the most popular questions home buyers ask is “what happens if the home I’m buying didn’t appraise?” and it’s an excellent question. First and foremost, home buyers need to understand appraisals are an “art,” not a “science,” so there are no set adjustments appraisers make.

The Home I'm Buying Did Not Appraise Now What

The same home may be appraised by two different appraisers who both hold the same real estate appraisal license and odds are they will come back with different appraised values. One home appraiser may make a $25,000 adjustment for a private swimming pool while another may only make a $10,000 adjustment. Therefore, one home could easily appraise for $15,000 more than the other. That is a BIG difference.

There will be homes with supporting comparables that should appraise and don’t. Then there are homes that don’t have a single supportive comparable sale and shouldn’t appraise but somehow do. So home buyers need to understand there are no guarantees when it comes to a home appraising. If the home you’re buying didn’t appraise and you’re wondering what’s next there are a few possible outcomes. Let’s discuss them now!

Seller Price Reduction

When a home didn’t appraise the first route most buyers go is to ask the seller to reduce the contracted price down to the appraised value. After all, the answer is always no if you don’t ask, right? So it usually never hurts to ask. However, a seller is not required to reduce the contract price both parties originally agreed to down to the lower appraised value.

Now, if the home appraisal is a true reflection of what the home is worth in today’s real estate market the seller may consider reducing the price. This means the comparable sales the appraiser used are most like the subject property and any adjustments made are within reason. Therefore, the appraisal itself is an accurate representation of the home’s value. In this instance, sellers really need to consider if it’s worth starting the process all over again to end up with the same result only with a different buyer.

However, if the home appraisal is “bad” the seller probably won’t be willing to reduce the contracted price. “Bad” meaning the comparable sales used by the home appraiser are nothing like their property. In this case, it’ll probably be worth the risk to start the process all over again and put their home back on the market, but it ultimately depends on the seller’s situation.

Sometimes if the appraised value is a few thousand dollars less than the contracted price it may not be worth it for the seller to start the process all over. But if the appraisal is tens of thousands of dollars less than the contracted price and it’s considered a bad appraisal the odds of the seller reducing the price are greatly decreased.

If the home you're buying or selling didn't appraise do you know what happens next? If not here are the most common outcomes. #realestate #homeappraisal Click to Tweet

Pay the Shortfall

If the seller won’t budge and reduce the contracted price down to the appraised value the buyer always has the option to pay the appraisal shortfall. This means the buyer will pay the difference between the contracted price and the appraised price at closing.

What is an Appraisal Shortfall?In a competitive real estate market it’s not uncommon for a buyer to cover a portion or the entire appraisal shortfall. In fact, some buyers include it in their offer, which simply states they are willing to pay $X amount if the home doesn’t appraise, not to exceed the contracted price.

Now, it’s important to understand the appraisal shortfall will be in addition to the buyer’s down payment and closing costs. Not all buyers are in the position to do this.

However, if the home didn’t appraise and was only $1,000 to $2,000 below the contracted price, in most cases it’s probably best for the buyer to come up with the difference. Because if they decide against paying the shortfall but plan on buying a home they will have to pay for another home inspection and home appraisal, which can easily be over $1,000 combined. At that point, it makes more sense to find the funds than start the home-buying process all over again.

Meet in the Middle

If a home didn’t appraise another option, that could be considered a win-win for both parties, is to meet in the middle. Meaning the buyer covers a portion of the appraisal shortfall and the seller reduces the contract price to cover the other half. While it may not be in the exact middle of the appraisal shortfall neither party will have to cover the entire amount.

Obviously, the buyer would like the seller to reduce the price down to the appraised value and the seller would like the buyer to come up with the entire appraisal shortfall but this is a good compromise. Neither party is footing the entire bill.

Cancel the Contract

If the buyer and seller can’t come to terms because the home didn’t appraise the last alternative is for the buyer to cancel the contract and walk away, if the contract allows. Now, the buyer will be out all of the money they spent on items like the home inspection, home appraisal, and HOA application. However, they will not be forced to pay the appraisal shortfall and in some cases might even get their entire escrow deposit back. This will vary from state to state and contract to contract.

While the buyer is out money and time the seller is usually only out time unless they got ahead of themselves. Occasionally once a seller’s home goes under contract they start making arrangements to move even though the buyer still has contingencies. Sometimes these arrangements, like putting a deposit down on an apartment, could end up costing the seller money.

Final Thoughts

Low Appraisal Next StepsUnfortunately, nobody knows what a home is going to appraise for except the home appraiser. Not the listing agent, buyers agent, seller, or buyer. While the Realtors involved can do extensive research and will have a pretty good idea of what the home should appraise for it doesn’t necessarily mean it will.

Over the last 20+ years, I’ve had listings that should easily appraise and didn’t. Then I’ve had listings that didn’t have a single supportive comparable sale yet they appraised for the contracted price. This is one of the many reasons why I encourage sellers and buyers not to stress over the appraisal, neither have control and it’s best to cross that bridge if they have to.

Home appraisals are one of the top reasons why a real estate transaction blows up. However, if top Realtors are involved in the transaction they will have the tools and know-how for getting over these types of hurdles.

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If the home you're buying or selling didn't appraise do you know what happens next? If not here are the most common outcomes. #realestate #homeappraisal Click to Tweet

Popular Home Appraisal Questions

How do you negotiate with seller after low appraisal?  When negotiating with a seller after a home didn’t appraise, it’s important to communicate the appraisal results clearly and provide supporting evidence for the property’s value. Express your willingness to work together to find a solution, such as adjusting the sale price or covering a portion of the shortfall. Maintain a cooperative and respectful tone throughout the negotiation process to increase the chances of reaching a mutually agreeable resolution.

What if my house doesn’t appraise for the purchase price? If your house didn’t appraise for the purchase price there are 4 popular outcomes. One, you as the seller reduce the contracted price down to the appraised price. Two, the buyer comes up with the entire appraisal shortfall. Three, you and the buyer meet somewhere in the middle, they come up with some additional funds and you reduce the price to cover the remaining shortfall but neither party is covering the entire amount. The fourth option is for the buyer to cancel the contract, but this ultimately depends on the contract and contingencies.

Can seller back out if appraisal is low?  The ability of a seller to back out of a contract, because the home didn’t appraise, depends on the terms specified in the contract. Most contracts will allow the buyer to cancel due to low appraisal but not the seller. So the buyer can ask the seller to reduce the price down to the appraised value and the seller can’t cancel, which is why it never hurts for a buyer to ask the seller for a price reduction.

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. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.

Areas of service include WellingtonLake WorthRoyal Palm BeachBoynton BeachWest Palm BeachLoxahatcheeGreenacres, and more.

The Home I’m Buying Didn’t Appraise, Now What?

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Michelle Gibson Wellington Florida REALTORMichelle Gibson of the Hansen Real Estate Group Inc is a full-time REALTOR who has been specializing in Wellington Florida real estate since 2001. This veteran of the real estate industry has expertise in technology, marketing, and social media.


Hansen Real Estate Group Inc. is a full-service real estate brokerage specializing in residential real estate. As a customer-focused, quality organization, we achieve success one client at a time. Call 561-333-0446 or e-mail me today at [email protected].

Michelle Gibson and Hansen Real Estate Group Inc fully support the principles of the Fair Housing Act and the Equal Opportunity Act. Accessibility Statement


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