Low Appraisal? Here’s How to Save Your Real Estate Deal
Buying a home is exciting, offers, inspections, plans, hope, but there’s one moment that can bring everything to a screeching halt: when the appraisal comes in lower than the contract price.
The Problem: Appraised Value Doesn’t Match the Offer
You and the seller agree on a contract price. The buyer proceeds with financing, and the lender orders an appraisal to establish the home’s market value. But what if the appraiser says the home is worth less than what you agreed to pay?
That is exactly what happens in this narrative: the appraised value falls short of the contract price. The result? The bank won’t lend for more than what the home is deemed to be worth. That leaves a financing gap.
Essentially: you can’t get a mortgage for the full contracted amount. This puts both buyer and seller in a tough spot.
Why Do Low Appraisals Happen?
Before we get to solutions, it’s helpful to understand how appraisals may land low in the first place:
Comparable sales (comps) don’t support the higher price. Appraisers rely on recent sales of similar homes nearby to support value. If those sales are lower, it constrains how high the appraiser can go.
Overambitious pricing. Sometimes the buyer or seller pushes the price above what real market data supports.
Errors or omissions. The appraiser might make mistakes about square footage, upgrades, condition, lot size, or comparable properties.
Market shifts. If the market is cooling or volatile, comps can lag actual buyer demand.
Appraisal rules. The appraised value typically must be “bracketed” by the prices of valid comps. It can’t wildly exceed the comparable sales by relying on upward adjustments alone. Medium
So, a low appraisal does not necessarily mean the appraiser is incompetent — it might mean the data doesn’t support a higher number.
What Are Your Options When the Appraisal Is Low?
When you face a shortfall between contract price and appraisal, several paths open up — some painful, some negotiable, some strategic:
Renegotiate with the seller
Ask the seller to lower the sales price to match the appraisal. In many cases, they may prefer adjusting the contract rather than losing the deal entirely.Meet in the middle
The buyer may offer to pay part of the difference in cash, asking the seller to drop part of it — a split-the-gap solution.Pay the difference out of pocket
If you’re determined to move forward and have reserves, you can pay the extra out of pocket above what the lender will cover.Appeal or challenge the appraisal
Submit new comps or evidence to the lender and request a reconsideration of the appraisal. Sometimes, errors or omitted data can be corrected.Walk away
If you included an appraisal contingency in your contract, you can legally back out without losing your earnest money deposit.Switch loan types or loan structure
In certain cases, you might be able to choose a different loan product or structure that allows covering more than the appraised value (though not all loan types permit this).
Each option has tradeoffs — in time, cost, risk, and negotiation leverage.
Why an Appraisal Contingency Is So Critical
The best defense against a low appraisal is to include an appraisal contingency in your purchase contract. This clause protects the buyer by making the deal conditional on the home appraising at or above the agreed price. If it doesn't, the buyer can renegotiate or walk away without financial penalty. blog.howardhanna.com+2HomeLight+2
Without such a contingency, the buyer could be forced to cover the gap out of pocket — or lose their deposit — to keep the deal alive.
In hot markets, buyers might feel pressured to waive that clause to make their offer more attractive, but that’s a risky move.
Key Lessons & Takeaways
A low appraisal is not uncommon, especially in fast-moving or overheated markets.
Appraised value and market value are not always the same. Just because buyers are willing to pay more doesn’t always mean comps support it.
Always review the appraisal report carefully — check for errors or missing comps that could change the valuation.
Negotiation, flexibility, communication, and a strong agent can often salvage a deal.
Never underestimate how valuable the appraisal contingency is.
