What Happens If the Appraisal Comes in Low? Options for Buyers and Sellers

A Low Appraisal Isn't the End of the Deal

Few phone calls make buyers and sellers more nervous than "the appraisal came in low." You agreed on a price, everyone's packing, and suddenly the lender says the home is worth less than the contract says.

Take a breath. A low appraisal is a problem to solve, not automatically a dead deal. Most of the time there are a few clear paths forward, and which one makes sense depends on the gap, the loan type, the contract and how much each side wants the deal to close.

Why the Appraisal Matters So Much

If the buyer is financing, the lender bases the loan on the lower of the contract price or the appraised value. So if a home is under contract for $400,000 and appraises at $390,000, the lender generally lends against $390,000. That $10,000 difference is the appraisal gap, and someone has to deal with it.

Appraisers look at recent comparable sales, condition and features. In fast-moving markets, prices can get ahead of the closed sales appraisers rely on, which is one common reason values come in short.

Option 1: Renegotiate the Price

The most common fix is for the seller to lower the price to the appraised value, or close to it. For sellers, that can feel painful, but it's worth comparing against the alternative: putting the home back on the market, where the next buyer's lender will likely order an appraisal too.

Option 2: The Buyer Covers the Gap

A buyer can choose to bring extra cash to closing to cover the difference between the appraised value and the price. Some buyers agree to this in advance with appraisal gap language in their offer, which I explain in my guide to offer strategy in a competitive market.

Covering a gap means paying more than the lender says the home is worth, and it uses cash you might need for reserves or repairs. It can make sense if you love the home and plan to stay a long time. It's worth talking with your lender first about how it affects your cash to close.

Option 3: Meet in the Middle

Often the answer is a split: the seller comes down some and the buyer brings some extra cash. Neither side gets everything they wanted, but the deal closes on time, and for many people that's the real goal.

Option 4: Request a Reconsideration of Value

If the appraisal seems to have missed something, like better comparable sales, recent upgrades or errors in square footage, the buyer's lender can submit a reconsideration of value. Agents usually help gather the supporting comps and details.

It doesn't always change the number, and it can add a little time, but when the appraisal has a real mistake or overlooked a strong comp, it's worth asking. A reconsideration needs evidence, not just disagreement.

Option 5: Walk Away With an [Appraisal Contingency](/blog/virginia-standard-purchase-agreement-explained)

If the contract includes an appraisal contingency and the parties can't agree on a fix, the buyer may be able to cancel and typically keep their earnest money, as long as they follow the contract's deadlines and notice requirements. Without that protection, walking away can put the deposit at risk. Your agent and closing attorney can confirm exactly what your contract allows.

How It Works With VA, FHA and Conventional Loans

VA loans. VA appraisals come with a few features buyers and sellers should know about. VA has a process that generally gives the agent a chance to send additional comparable sales before a low value is finalized, and buyers can request a reconsideration of value. VA contracts also typically include an amendatory clause, which generally lets the buyer out of the contract without losing their deposit if the home appraises below the price, unless they choose to proceed. My guide to VA loans in Hampton Roads covers the basics.

FHA loans. FHA purchases also generally include an amendatory clause that protects the buyer if the appraisal is below the price. FHA appraisals can also note required repairs, and an FHA appraisal generally stays attached to the property for a period of time, which matters if the deal falls apart and the next buyer also uses FHA. See FHA loans for first-time buyers.

Conventional loans. Protection depends more on the contract's appraisal contingency. Some conventional loans may qualify for an appraisal waiver, but that's the lender's call. More in conventional loans explained.

Rules and procedures change, so ask your lender how your specific loan handles a low value.

How I Handle a Low Appraisal

On the selling side, I prepare for the appraisal before it happens by having comparable sales and a list of upgrades ready to share. On the buying side, I help you weigh whether the home is worth bringing more cash or whether it's time to renegotiate or walk.

Either way, the goal is a calm decision based on numbers, not panic. If you're under contract or about to be, reach out to me and we'll talk through your options. Related reading: inspection negotiation and how to price your home.

This article is general information, not legal, tax or financial advice. Contract terms, loan rules and costs vary, so confirm your specifics with your lender, closing attorney, title company or tax professional.