What to Do If a Home Appraisal Comes in Low

What Does It Mean When an Appraisal Comes in Low?

A low appraisal occurs when the home appraisal values the property below the agreed purchase price. Since lenders base loan amounts on appraised value — not the contract price — a low appraisal creates a financing gap that must be resolved before closing.

This difference between the contract price and appraised value is known as an appraisal gap.

Why Appraisals Come in Below the Sale Price

• Overpricing relative to recent comparable sales
• Rapidly changing market conditions
• Limited or outdated comparable data
• Differences between list price strategy and lender valuation
• Property condition or functional issues

It’s important to understand that an appraisal is not the same as a pricing estimate or agent analysis. A comparative market analysis (CMA) reflects market behavior, while an appraisal reflects lender risk tolerance.

How a Low Appraisal Affects the Contract

Most purchase agreements include an appraisal contingency. This clause gives the buyer specific rights if the home does not appraise at or above the purchase price.

Depending on the contract, a low appraisal may allow the buyer to:

• Renegotiate the purchase price
• Request seller concessions
• Cancel the contract without penalty

In competitive markets, some buyers include an appraisal gap contingency, agreeing to cover part or all of the difference with additional cash.

Seller Options When an Appraisal Comes in Low

• Lower the price to match the appraised value
• Negotiate a split of the appraisal gap with the buyer
• Request a reconsideration of value using stronger comps
• Accept a cash buyer willing to bridge the gap
• Cancel and relist if contract terms allow

The best option depends on buyer motivation, financing terms, and how long the property has been on the market.

Can Sellers Challenge a Low Appraisal?

Yes — sellers can request a reconsideration of value, but success depends on evidence. This typically includes:

• Recent comparable sales the appraiser may have missed
• Errors in square footage, features, or condition
• Market data showing rising values

Reconsiderations must be factual and data-driven. Emotional appeals or list price arguments rarely influence appraisal outcomes.

When Walking Away Makes Sense

In some cases, walking away may be the most strategic move — especially if the appraisal reflects broader market conditions or signals pricing resistance from future buyers.

Sellers should weigh:

• Time on market
• Carrying costs
• Likelihood of repeat appraisal issues
• Strength of backup offers

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