Key takeaways
- A low appraisal can delay or derail a home sale because lenders won’t finance more than the appraised value.
- Buyers and sellers have options: renegotiate, challenge the appraisal, contribute cash, or walk away.
- Preparing with comps, repairs, and an experienced real estate agent can help reduce appraisal issues.
What does a low appraisal mean?
A low appraisal happens when the appraiser values the home for less than the purchase price. Because lenders won’t approve loans above the appraised value, this creates a financing gap that can put the deal at risk.
For example, if you offered $400,000 but the home appraisal comes back at $380,000, your lender will only approve a loan based on $380,000. The $20,000 difference has to be resolved between the buyer and seller.
Why appraisals come in low
“It is not uncommon for an appraiser to miss one or more important pieces of the value equation when appraising a home,” states Mark Bruno, realtor and team leader at Monterey Peninsula Home. “One of the first things to look at is whether the comparable properties used in the appraisal are truly comparable to the subject property. Are they located in the same city and neighborhood? Were appropriate adjustments made for views, privacy, lot size, condition, location, and other features that can weigh heavily on value here? I have personally seen appraisals use similar properties in different but adjoining cities in a way that reduced the value of the subject property by more than $1 million. On the Monterey Peninsula, small changes in location, view, privacy, or neighborhood can create very large differences in value.”
Several factors can lead to a low appraisal:
- Rising markets: Home prices may be increasing faster than comparable sales data reflects.
- Unique properties: Homes without many recent comps can be harder to appraise accurately.
- Condition issues: Outdated systems, deferred maintenance, or visible defects may lower value.
- Market cooling: In slower markets, appraisals may fall below recent contract prices.
What buyers can do if the appraisal comes in low
1. Renegotiate the purchase price
Buyers can ask the seller to lower the price to match the appraised value. In many cases, sellers agree rather than risk losing the sale. This is often the cleanest solution when the seller is motivated, the appraisal appears reasonable, or the market has cooled since the offer was accepted. The buyer’s agent can use the appraisal report and recent comparable sales to support the request.
2. Cover the difference in cash
If buyers want to proceed at the agreed price, they can pay the gap out of pocket. This often happens in competitive markets. This may work for buyers with extra savings, but it increases the amount of cash needed at closing and can affect emergency reserves. Buyers should confirm with their lender how the additional cash affects loan approval.
3. Challenge the appraisal
If the buyer or agent believes the appraisal is inaccurate, they can request a reconsideration of value by submitting better comparable sales or correcting errors in the report.
“If a home appraisal comes in low, the first step is to carefully review the appraisal report for errors, missing upgrades, or comparable sales that may not accurately reflect the property’s value,” Michael Marchena at Marchena Home Team recommends. “From there, your agent and lender can help determine the best path forward, whether that means requesting a reconsideration of value, renegotiating the purchase price, adjusting the loan terms, or deciding whether the buyer can cover the appraisal gap. The key is not to panic – a low appraisal does not always kill the deal, but it does need to be handled strategically and quickly.”
4. Switch lenders or appraisers
Since different lenders may use different appraisal management companies, ordering a new appraisal could yield a higher valuation.
5. Walk away
If the gap can’t be bridged, buyers can use an appraisal contingency to cancel the contract without penalty.
What sellers can do if the appraisal comes in low
1. Lower the price
Agreeing to the appraised value may be the fastest way to keep the deal moving. This may work for buyers with extra savings, but it increases the amount of cash needed at closing and can affect emergency reserves. Buyers should confirm with their lender how the additional cash affects loan approval.
2. Negotiate with the buyer
Sellers can agree to split the difference or cover part of the appraisal gap.
“A low appraisal doesn’t have to mean the deal is dead. The first step is to carefully review the appraisal for inaccuracies and gather any relevant comparable sales that may not have been considered,” suggests Andrew Lewis, realtor, listing specialist, and team leader at Performance Real Estate. “From there, buyers and sellers can explore solutions such as appealing the appraisal, adjusting the sales price, or negotiating how the gap will be covered. The most successful outcomes happen when both parties focus on solving the problem rather than reacting emotionally to the number.”
3. Request a second appraisal
If the first appraisal seems flawed, sellers can support the buyer in requesting a new one.
4. Improve the property
Minor updates, repairs, or cosmetic fixes can sometimes help raise the appraised value in a re-evaluation.
5. Relist the home
If the seller believes the appraisal is unreasonably low and no compromise is possible, they may choose to walk away and list again.
How to prevent a low appraisal
While you can’t control every factor, preparation helps reduce risk:
- Work with an experienced real estate agent who knows local comps.
- Provide a list of recent improvements to the appraiser.
- Tidy and maintain the property before the appraisal.
- Be mindful of pricing strategy in fast-changing markets.
- Prep for the home appraisal to secure the best possible valuation.
FAQs about low appraisals
How often do appraisals come in low?
Industry estimates suggest that fewer than 10% of appraisals come in below contract price, but the risk increases in hot or volatile markets.
Can you challenge a low appraisal?
Yes. Buyers or sellers can request a reconsideration of value by submitting stronger comparable sales or pointing out mistakes in the report.
Do sellers have to lower the price after a low appraisal?
No. Sellers aren’t required to reduce the price, but they may need to negotiate if they want to keep the deal alive.
What happens if I can’t cover the appraisal gap?
If neither side can bridge the difference, the deal may fall through unless the contract includes a workaround.
Do cash buyers need an appraisal?
No. Cash buyers don’t need lender appraisals, but some still order one for peace of mind.
Moving forward: When your appraisal came in low
A low appraisal can be a challenging moment, but it’s important to remember that it’s a common hurdle in real estate, not necessarily a deal-breaker. Proactive planning, clear communication, and informed decision-making are key to successfully navigating this situation. When your home appraisal comes in low, connecting with a Redfin agent for their personalized support and expert guidance can make all the difference in achieving your home-buying or selling goals.
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