Module 9 · Lesson 6
What Happens if the Appraisal Is Low?
Explains the practical options available to buyers and sellers when an appraisal comes in below the purchase price.
6 min read
What you'll learn
- What a low appraisal means for the loan amount
- What options buyers and sellers have in response
- How the appraisal contingency factors into these options
- How to evaluate whether to challenge an appraisal
When an appraisal comes in below the agreed purchase price, it is often called a low appraisal or an appraisal gap. This situation affects the loan amount a lender is willing to provide and typically requires the buyer and seller to decide how to move forward.
Why a Low Appraisal Matters
Lenders generally base the loan amount on the lower of the purchase price or the appraised value. If a home is under contract for 300,000 dollars but appraises for 290,000 dollars, the lender will typically calculate the loan based on 290,000 dollars, which can leave a gap the buyer needs to address to complete the purchase at the original price.
Common Options After a Low Appraisal
Buyers and sellers generally have several possible paths forward. The seller can agree to lower the price to match the appraised value. The buyer can pay the difference between the appraised value and purchase price in cash, since that gap typically cannot be financed. The two parties can split the difference. The buyer can request a formal reconsideration of the appraised value if there is a reasonable basis. Or, if an appraisal contingency is in place, the buyer can cancel the contract, typically with earnest money protected.
The Role of the Appraisal Contingency
Whether a buyer can walk away without losing earnest money over a low appraisal generally depends on whether the contract includes an appraisal contingency and whether its terms have been satisfied or waived. Without this contingency, a buyer may have fewer protections if they cannot or choose not to cover the gap.
| Option | What it involves |
|---|---|
| Seller lowers price | Purchase price adjusted to match appraised value |
| Buyer pays the gap | Buyer covers the shortfall with additional cash |
| Split the difference | Both parties share the gap between them |
| Reconsideration of value | Formal request asking the appraiser to review specific concerns |
| Cancel the contract | Available if an appraisal contingency protects the buyer |
Requesting a Reconsideration of Value
If the buyer's agent believes the appraisal overlooked relevant comparable sales or contains factual errors, they can submit a formal request, often called a reconsideration of value, asking the appraiser or lender to review the concerns. This does not guarantee a changed outcome but is a legitimate option when there is a substantive basis for it.
A low appraisal can be stressful, but it is a manageable situation with several potential paths forward. Understanding these options in advance helps buyers respond calmly and make an informed decision if it happens to them.
Key takeaways
- A low appraisal can limit how much the lender is willing to loan against the property.
- Common responses include renegotiating price, covering the gap in cash, or canceling.
- An appraisal contingency, if included, generally protects the buyer's earnest money in this situation.
- Buyers can request a reconsideration of value if there is a reasonable basis to challenge the appraisal.
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Educational content only — not financial, legal, or tax advice. Verify details with a licensed professional for your situation.