What Happens If Your Home Appraisal Comes in Low?

Your offer was accepted, you're excited, and then the appraisal comes back $20,000 below the purchase price. Now what? First, a low appraisal does not automatically mean the deal is dead. It means the appraiser believes the home's value is lower than the price you and the seller agreed to pay.

That matters because when you're financing a home, the lender is using the property as collateral for the loan. If the appraisal comes in below the contract price, the buyer and seller have a gap to deal with. The good news is that there are usually several ways to do that.

The Seller Can Lower the Purchase Price

One option is for the seller to reduce the purchase price to the appraised value. If you're under contract for $500,000 and the appraisal comes back at $480,000, for example, the seller could agree to lower the price to $480,000.

Of course, the seller doesn't necessarily have to agree to that. They accepted an offer at $500,000, and they may still believe the house is worth $500,000. That's where the negotiation starts.

The Buyer Can Bring Additional Cash

The buyer may also be able to cover some or all of the appraisal gap with additional cash. Using that same $20,000 appraisal gap, the buyer could potentially move forward at the original purchase price by bringing more money to closing.

Whether that makes sense is a completely different question. Having an extra $20,000 available doesn't necessarily mean spending it to cover an appraisal gap is the best choice for that buyer. This is where we need to look at the buyer's finances, the property, the market, and how badly they want this particular house.

The Buyer and Seller Can Split the Difference

It doesn't have to be all or nothing. The buyer and seller can negotiate something in between. If the appraisal is $20,000 low, maybe the seller reduces the price by $10,000 and the buyer covers the remaining $10,000. Or maybe they land on a completely different number.

This is a negotiation, and the solution needs to make sense for the people actually involved in the transaction. A low appraisal gives us a problem to solve, but it doesn't dictate one specific solution.

The Buyer May Be Able to Walk Away

Depending on the contract, the buyer may also have the option to terminate the transaction after a low appraisal. Whether that's available depends on the terms of the purchase agreement, including any appraisal protections or waivers the buyer agreed to when making the offer.

That's why the contract matters so much. Before deciding how to respond to a low appraisal, we need to know exactly what the buyer and seller have already agreed to and what options are still available under that agreement.

Can You Challenge a Low Appraisal?

Sometimes. If there are additional comparable sales or relevant information that may support a different value, it may be possible to submit that information and challenge the appraisal. That doesn't mean an appraiser is automatically going to change the value just because the buyer, seller, or agents disagree with it.

But if there is legitimate information that wasn't considered, it's worth looking at. The goal isn't simply to argue that the appraisal is wrong. It's to determine whether there's actual market data that supports reconsidering the value.

A Low Appraisal Doesn't Automatically Kill the Deal

Getting a low appraisal can be stressful, particularly when everyone thought the transaction was moving along smoothly. But a low appraisal is a problem to solve, not an automatic cancellation. The seller may lower the price, the buyer may bring additional cash, both sides may compromise, the appraisal may be challenged, or the buyer may have the ability to walk away.

The key is figuring out which option works for the buyers, sellers, lender, appraisal requirements, and everyone else involved in actually getting the transaction to closing.