A low appraisal can catch buyers and sellers off guard, especially in a competitive market. When a home doesn’t appraise at the agreed contract price, it doesn’t mean the deal is dead, but it does require decisions from everyone involved.
Here’s what it means and what usually happens next.
Why Appraisals Matter
Lenders use appraisals to confirm the home’s value.
If the appraisal comes in lower than the contract price:
- The lender will base the loan on the appraised value, not the agreed price
- The gap must be addressed before the loan can move forward
Option 1: Renegotiate the Price
One common solution is renegotiation.
This may involve:
- The seller lowering the price to match the appraisal
- A partial price reduction shared by both parties
This option keeps the deal moving while reflecting market value.
Option 2: Buyer Brings Additional Cash
Buyers can choose to cover the difference.
This means:
- Paying the appraisal gap out of pocket
- Increasing the total cash needed at closing
Some buyers choose this if they strongly want the home and can afford it.
Option 3: Request an Appraisal Reconsideration
If there’s evidence the appraisal missed key details, an appeal may be possible.
This usually requires:
- Strong comparable sales
- Proof of upgrades or features not considered
Success depends on data and timing.
Option 4: Adjust the Loan Structure
In some cases:
- Buyers may change loan terms
- Increase down payment
- Modify financing options
This approach depends on lender guidelines.
Option 5: Walk Away
If an appraisal contingency is in place, buyers may have the option to cancel the contract without penalty.
This happens when:
- No agreement can be reached
- Financing terms can’t be adjusted
How Often This Happens
Low appraisals are more common in:
- Rapidly rising markets
- Multiple-offer situations
- Unique or hard-to-compare properties
They’re less common in balanced markets with strong comparable data.
Final Thought
A low appraisal doesn’t mean a deal has failed. It simply means the numbers need to be addressed. Understanding the options ahead of time helps buyers and sellers respond calmly and strategically.
With the right guidance, many appraisal issues can be resolved successfully.
