The Appraisal Came In Low—Now What?

When you’re buying a home using a mortgage, your lender will order a professional evaluation called an appraisal. The appraiser inspects the property (and comparable homes nearby) to determine its market value, which is the amount a reasonably informed buyer would pay in today’s conditions.

Why is this important? Because lenders will not approve a loan for more than the home is worth (from their perspective). They use the appraised value (or the contract price, whichever is lower) to set how much they’ll finance.

So, when the appraisal comes in lower than the agreed-upon purchase price, that difference creates a problem: either the buyer must cover the gap, the seller must reduce the price, or the deal may fall through.

For Buyers

If you’re the buyer and the appraisal comes in low, here’s what you should know.

How a Low Appraisal Can Affect Loan Approval or Terms

• The lender will base their loan amount on the lesser of the appraised value or the contract price. If you agreed to pay $350,000 but the appraisal says it’s worth only $330,000, the lender may only finance against the $330K.

• Because of that, you may have to bring additional cash to make up the difference, or your loan-to-value (LTV) ratio could be higher than the lender is comfortable with.

• Alternatively, if financing cannot be adjusted and you don’t have the extra funds, the deal may not close.

What Options You Have

When faced with a low appraisal, your options typically include:

• Ask the seller to reduce the price to match the appraised value (or at least come closer).

• Bring more cash to closing so you can cover the difference between the contract price and the appraised value (i.e., you accept paying more than what the lender sees as value).

• Split the difference — negotiate with the seller so you both absorb a portion of the gap (so you're not paying everything out of pocket).

• Challenge or request a review of the appraisal if you believe the appraiser made mistakes (for example, wrong comps, missed improvements).

• Walk away from the deal, if your contract includes an appraisal contingency (which allows you to exit without penalty in many cases).

What to Consider When Deciding Whether to Move Forward or Walk Away

• How much is the gap? If the difference between your contract price and the appraised value is small and you have cash, moving forward may make sense. If it’s large, the risk grows.

• Your comfort with paying more than appraised value. Are you okay paying “above value” based on what you believe the home is worth long-term?

• Market conditions. Is the local market trending up (so maybe value will increase) or flat/declining (so paying above value is riskier)?

• The appraisal contingency in your contract. Without it, you may be locked into the deal even if the appraisal is low.

• Your loan type and lender rules. Different lenders and loan programs (FHA, VA, conventional) have different rules about how much you can borrow and how much down is required. Terms may vary—check with your local pro.

• Other risks. For example, if you pay more than appraised value and the home market dips, you carry an immediate equity “deficit.”

For Sellers

If you’re selling and the buyer’s appraisal comes in low, here’s what you need to know and how to respond.

How to Respond When a Buyer Presents a Low Appraisal

• Ask to review the appraisal report: check whether the appraiser used relevant comparables, whether the home improvements were properly considered, and whether any relevant features or condition issues were missed.

• Have a conversation with the buyer and their agent about next steps: Are they willing to bring extra cash, reduce their offer, or do you need to find a new buyer?

• Decide whether you’ll reduce the price, accept the gap split, or relist the property and go back to the market.

• If you choose to relist, prepare for the possibility that the next buyer will also require financing—and thus another appraisal, with no guarantee it will come in higher than the previous one.

Why Relisting (Rejecting the Appraisal & Sitting Tight) Is a Gamble

• The next buyer is still likely to need a mortgage—and that means the home still has to appraise for what the lender will support. Just because one buyer’s appraisal came in low doesn’t guarantee the next one will be higher.

• Time and cost matter: relisting delays your timeline, might expose the home to changing market conditions, and means you incur more carrying costs.

• The price you’re asking may simply be above current market value (which is exactly what the appraiser flagged). Unless something in the home or comps changes, you risk repeating the same outcome.

• In competitive markets, sellers may assume they’ll get higher offers—but if the neighborhood comps don’t support a higher number, you might be back in the same place.

The Importance of Local Market Trends & a Knowledgeable Agent

• A good listing agent will have done a solid comparative market analysis (CMA) to make sure your price is realistic given current sales in your area.

• They’ll guide you on how quickly homes are selling, what similar homes are actually going for, and whether the market is trending up or down. This insight helps you set a list price that aligns with realistic appraisal outcomes.

• Communicating clearly with prospective buyers (and their agents) about how you arrived at your price—showing data and comparative sales—can help strengthen the buyer’s confidence (and the appraiser’s too).

• If you already had a pre-listing appraisal or valuation done, use it as a proactive tool to show value and possibly prevent surprises.

Bottom Line
Whether you’re buying or selling, when the appraisal comes in lower than the purchase price, it doesn’t necessarily mean the deal is dead — but it does mean you’ll need a clear strategy and open communication.

• Buyers should evaluate how large the gap is, consider whether they’re willing and able to cover it, negotiate with the seller, or walk away if their protections allow.

• Sellers should review the appraisal critically, negotiate with the buyer (rather than reflexively pulling the home from the market), and lean on a knowledgeable agent who understands your market and the appraisal realities.
  In short: set realistic expectations, know your numbers, and stay flexible. Deals don’t fail just because of a low appraisal—they fail when one side doesn’t respond with a plan.

  Until next week!

  This newsletter is educational in nature — for specific financial or legal advice related to your transaction, consult a qualified professional in your state.