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Appraisal Came In Low: What to Do (4 Options) (2026)

•offer.guide Team

Appraisal Came In Low: What to Do (4 Options)

📚 Part of the Competitive Situations Series:

You did everything right.

Found the perfect house. Made a competitive offer. Got accepted. Celebrated with champagne. Started planning where the couch will go.

Then your lender calls: "The appraisal came in at $380,000."

Your offer was $410,000.

Your stomach drops.

Now what?

A low appraisal is one of the most stressful moments in the home buying process. But it's not the end of the deal—unless you want it to be. You have options, and understanding them quickly is critical because you usually only have a few days to respond.

This guide explains exactly what a low appraisal means, why it happens, and the four main paths forward—with real examples of how each plays out. If you offered appraisal gap coverage as part of your bidding war strategy, this is where that commitment gets tested.

Let's fix this.

Understanding What Just Happened

Why Appraisals Matter

When you get a mortgage, the bank isn't just lending you money based on your offer. They're lending based on what the house is actually worth.

If the house is worth less than your offer, the bank won't lend you the full amount. Why? Because if you default, they need to sell the house to recover their money. If it's not worth what you paid, they lose money.

Example:

  • You offer $410,000 with 10% down
  • Your down payment: $41,000
  • Loan amount: $369,000
  • Appraisal comes in at $380,000

The bank will only lend 90% of the appraised value:

  • 90% of $380,000 = $342,000
  • But you need $369,000
  • Gap: $27,000

Someone needs to come up with that extra $27,000 in cash. Either you, the seller, or the deal falls apart.

Why Do Appraisals Come In Low?

You offered in a competitive market and paid above market value

In bidding wars, emotions run high. You might have paid $20k over comparable sales to win the offer. The appraiser looks at hard data—recent sales—and determines the house isn't worth what you paid.

This is the most common reason in hot markets.

The comparable sales used were older or from different areas

Appraisers use recent sales (last 3-6 months) of similar homes nearby. If the market is moving fast and there aren't many recent sales, they might use older comps that don't reflect current prices.

Or they might use comps from a less desirable area, dragging down the value.

The appraiser made a mistake or was overly conservative

Appraisers are human. They make mistakes. Sometimes they:

  • Miss upgrades or renovations
  • Use inappropriate comps
  • Undervalue unique features
  • Are unfamiliar with the neighborhood

The market is actually cooling and prices are dropping

If you're buying at the peak of a market cycle, recent sales might be higher than current market conditions. The appraiser sees the trend and values accordingly.

Seller overpriced the house from the start

Sometimes sellers list at inflated prices hoping someone will bite. You did. But the appraiser brings reality back into the equation.

Your Four Options When Appraisal Comes In Low

You basically have four paths forward. Let's walk through each one with real examples.

Option 1: Pay the Difference in Cash

The Straightforward Solution

If you have extra cash, you can simply pay the appraisal gap and move forward with the deal at your original offer price.

How it works:

  • Original offer: $410,000
  • Appraisal: $380,000
  • Gap: $30,000

Original plan:

  • Down payment (10%): $41,000
  • Loan: $369,000

New plan:

  • Down payment: $41,000
  • Extra cash for gap: $30,000
  • Total cash needed: $71,000
  • Loan: $339,000 (90% of $380,000 appraised value)

You're now effectively putting down $71,000 on a $410,000 house—17.3% down instead of 10%.

When this makes sense:

You have the extra cash available

If you saved extra or have access to family funds, this is the cleanest option. Deal closes as planned, seller is happy, no renegotiation needed.

You really want this specific house

If this is truly the perfect home and you can't imagine walking away, paying the gap might be worth it to you emotionally.

You believe the appraisal is wrong and the house is worth your offer

Maybe the appraiser used bad comps or missed major upgrades. You've done your research using fair market value calculations and genuinely believe you're not overpaying.

The market is hot and homes are appreciating quickly

If homes in the area are appreciating 8-10% per year, paying an extra $30k might be recovered in 2-3 years of appreciation anyway.

Example: "We offered $425k, appraised at $400k. We had to pay $25k extra in cash. But we loved the house, had the savings, and knew the neighborhood was appreciating fast. Two years later, it's worth $460k. No regrets."

When this doesn't make sense:

You don't have extra cash without draining your emergency fund

Never drain your savings to $0 to cover an appraisal gap. Homeownership has surprise expenses. You need reserves.

You were already stretching your budget

If you were maxing out at your original down payment, coming up with another $20k-30k means you're now in dangerous territory financially.

You're not confident the house is actually worth your offer

If you have doubts—maybe you overpaid in a bidding war—paying extra cash to overpay even more doesn't make sense.

The gap is huge (more than 10% of purchase price)

$410k offer appraising at $380k = 7% gap. Manageable if you have cash. $410k offer appraising at $350k = 15% gap ($60k). That's a massive red flag that you drastically overpaid.

Pros and cons:

Pros:

  • Deal closes as planned
  • No renegotiation needed
  • Seller stays happy
  • You get the house

Cons:

  • Requires significant extra cash
  • You're paying more than appraised value
  • Less money for moving, repairs, emergency fund
  • Risk if you're wrong about the value

Option 2: Renegotiate the Price with the Seller

Ask the Seller to Lower the Price

This is often the first move buyers make. You go back to the seller and say: "The house appraised low. Will you lower the price?"

How it works:

  • Original offer: $410,000
  • Appraisal: $380,000
  • Request to seller: "Will you accept $380,000 instead?"

If seller agrees, problem solved. Everyone moves forward at the appraised value.

But sellers have three responses:

Response 1: "Yes, we'll lower to appraised value."

Best case scenario. Usually happens when:

  • Seller needs to close (job relocation, already bought next home)
  • Seller knows they were optimistic on price
  • Market is cooling and they're worried about finding another buyer
  • Appraisal validates that listing price was too high

Response 2: "No, we're sticking to $410,000."

This happens when:

  • Seller believes appraisal is wrong
  • They have backup offers at similar prices
  • They're not in a hurry
  • Hot market gives them confidence another buyer will pay

If this happens, you're back to Option 1 (pay the gap) or Option 4 (walk away).

Response 3: "Let's meet in the middle."

The compromise. This is the most common outcome.

Example:

  • Original offer: $410,000
  • Appraisal: $380,000
  • Gap: $30,000
  • Seller proposes: $395,000

This splits the gap:

  • You come up with $15,000 extra cash
  • Seller reduces price by $15,000
  • Both parties share the pain

How to negotiate effectively:

Present the appraisal professionally

"The appraisal came in at $380,000. Our lender will only lend based on appraised value. We'd like to proceed, but we need to discuss the price."

Don't be accusatory. Don't say "You overpriced this house."

Emphasize your commitment to closing

"We love the house and want to close. We're ready to move forward if we can find a solution."

Sellers want certainty. A buyer who's committed but needs a price adjustment is better than starting over with a new buyer who might face the same appraisal issue.

Offer to meet in the middle

"Would you consider $395,000? This splits the appraisal gap and allows us both to move forward."

Compromise signals reasonableness.

Provide context if the appraisal validates your concerns

"The appraiser noted the roof needs replacement in 2-3 years and the HVAC is 18 years old. These factors contributed to the valuation. Would you consider adjusting the price?"

Have your agent handle this

Your realtor should be leading this conversation with the listing agent, not you directly with the seller. Agents can negotiate more objectively.

Real example: "We offered $445k in a multiple offer situation. Appraised at $420k. We were devastated. Our agent explained to the seller that we were committed buyers with strong financing, but simply couldn't cover a $25k gap. The seller initially refused, but after three days of negotiation, agreed to $432,500. We covered $12,500, they came down $12,500. Everyone won."

Pros and cons:

Pros:

  • Reduces or eliminates the cash gap
  • Might get house for less than your offer
  • Seller might agree if they need to close
  • Fair solution if appraisal is accurate

Cons:

  • Seller might refuse
  • Negotiation takes time and adds stress
  • Could damage relationship with seller
  • If seller refuses, you're back to other options

Option 3: Challenge the Appraisal

Request a Reconsideration of Value

If you genuinely believe the appraisal is wrong, you can challenge it. This is called a "Reconsideration of Value" or ROV.

When to consider this:

The appraiser used bad comparables

Example: They used a sale from a less desirable neighborhood, or a home that was a foreclosure/fixer-upper when your home is updated.

The appraiser missed significant upgrades or features

Maybe the house has a finished basement the appraiser didn't account for, or a recent kitchen renovation they undervalued.

There are clear factual errors in the appraisal report

Wrong square footage, wrong number of bedrooms, incorrect lot size, etc.

Recent comps support your offer price

You find 3-4 comparable sales in the last 60 days that support your offer price that the appraiser didn't use.

How to challenge an appraisal:

Step 1: Review the appraisal report carefully

Get a copy from your lender. Read every page. Look for:

  • Comps used (are they truly comparable?)
  • Square footage and features (all accurate?)
  • Condition assessment (fair evaluation?)
  • Adjustments made (do they make sense?)

Step 2: Gather evidence

Find better comps:

  • Recent sales (last 60-90 days)
  • Similar size, age, condition, location
  • Sold prices that support your offer

Document errors:

  • Tax records showing correct square footage
  • Receipts for recent renovations
  • Photos of features appraiser missed

Step 3: Write a formal rebuttal

Your lender will have a process for this. You'll typically:

  • Submit a letter explaining the issues
  • Provide supporting comps and documentation
  • Request the appraiser reconsider or have a second appraiser review

Step 4: Wait for response

The appraiser will either:

  • Agree and revise the appraisal upward
  • Provide explanation for their valuation and stand by it
  • Lender might order a second appraisal

Success rate:

Challenging appraisals works maybe 20-30% of the time—and usually only results in a modest increase, not a complete reversal.

  • Best case: Appraiser increases value by $10k-15k, reducing your gap
  • Most likely: Appraiser stands by original value

Real example: "Our house appraised at $515k but we offered $545k. The appraiser used a comp from a different school district and missed that our house had been fully renovated in 2023. We submitted receipts for the $60k renovation and three better comps. The appraiser revised the value to $535k. Still a gap, but we negotiated the rest with the seller."

Pros and cons:

Pros:

  • Might increase appraised value
  • Costs nothing to try
  • Could save you thousands
  • Corrects genuine errors

Cons:

  • Time-consuming (usually 1-2 weeks)
  • Low success rate
  • Delays closing
  • Most appraisers stand by their work
  • Seller might get impatient

Option 4: Walk Away from the Deal

Use Your Appraisal Contingency

If you included an appraisal contingency in your offer (and you should have), you can walk away without penalty if the appraisal comes in low.

How it works:

Your contract says: "This offer is contingent on the property appraising at or above the purchase price."

Appraisal comes in low.

You notify the seller: "We're invoking our appraisal contingency and terminating the contract."

You get your earnest money back. Deal is dead.

When walking away makes sense:

The gap is enormous

If you offered $410k and it appraised at $350k, that's a $60k gap. That's not a small discrepancy—that's a signal you drastically overpaid. Walk away.

You don't have the cash to cover the gap

If covering the gap would drain your savings or force you to borrow from family, it's not worth it.

The seller refuses to negotiate

If the seller won't budge on price and you can't or won't pay the gap, walking away is your only option.

You discover other issues during the process

Maybe the appraisal combined with inspection findings make you realize this house has more problems than you thought.

You're no longer confident in the purchase

Cold feet are real. If the low appraisal makes you question the whole purchase, it's better to walk now than regret it for years.

The market is shifting

If you're seeing signs that the market is cooling (rising inventory, price drops, homes sitting longer), a low appraisal might be the canary in the coal mine. Walking away might mean finding a better deal in a few months.

Real example: "We offered $480k in a bidding war. Appraised at $445k. That's $35k we'd have to come up with in cash. We realized we got caught up in the competition and overpaid. Seller wouldn't negotiate. We walked away. Three months later, we found a better house for $450k. Best decision we made."

What happens when you walk away:

You get your earnest money back (assuming you have appraisal contingency)

  • Your deposit is refunded in full
  • Usually takes 5-10 business days

The seller has to deal with the appraisal issue

  • The next buyer will likely face the same appraisal problem
  • Seller might have to lower their listing price
  • House sits on market longer

You restart your search

  • Back to square one
  • But with better information about pricing
  • Might find something better

Emotional reality of walking away:

It hurts. You got excited. You told people. You started planning. Now it's gone.

But here's the truth: walking away from a bad deal is smarter than closing on a house you overpaid for by $30k-50k.

Six months from now, you'll either be happy you walked away, or regretful you didn't.

Pros and cons:

Pros:

  • No financial loss (get earnest money back)
  • Avoids overpaying for a house
  • Opportunity to find a better deal
  • Protected by your contingency

Cons:

  • Emotional disappointment
  • Restart the search process
  • Lose time and effort invested
  • Might not find something better quickly
  • Moving plans delayed

What If You Waived Your Appraisal Contingency?

The Costly Mistake

If you waived your appraisal contingency as part of your bidding war strategy, you're now stuck. Your only options are:

  1. Pay the gap in cash
  2. Negotiate with seller (but you have zero leverage)
  3. Walk away and lose your earnest money

Losing earnest money:

If you offered $410k with 3% earnest money, that's $12,300 you'll lose if you walk away.

This is why waiving appraisal contingencies is risky in competitive markets. If you offered appraisal gap coverage with a cap, at least you knew your maximum exposure.

How to Prevent Low Appraisals

Do your homework before making an offer

Run your own comparative market analysis. Calculate fair market value before you offer. Don't rely solely on your agent's opinion or your emotions.

Don't get caught up in bidding wars

Set your maximum price based on data, not competition. Determine your walk-away price using our guide. If bidding exceeds your number, walk away.

Offer appraisal gap coverage strategically

Instead of waiving the contingency entirely, offer to cover a specific gap:

"Buyer will cover up to $15,000 over appraised value."

This shows commitment but limits your risk. Learn more in our appraisal gap coverage guide.

Work with an experienced lender

Some lenders have better relationships with appraisers or are better at ordering appraisals that come in accurately.

Be realistic in hot markets

If you're offering significantly over asking price, understand there's a decent chance it won't appraise. Have a plan before you make the offer.

Making Your Decision: A Framework

When you get hit with a low appraisal, emotions run high. Use this decision framework:

Step 1: Take 24 hours to process

Don't make a snap decision. Sleep on it. Talk to your partner. Get past the initial panic.

Step 2: Run the numbers objectively

Can you afford to pay the gap without:

  • Draining your emergency fund below 3 months expenses
  • Borrowing money you can't easily repay
  • Sacrificing other important financial goals

If no, Option 1 is off the table.

Step 3: Assess if the appraisal is accurate

Review the appraisal report. Talk to your agent. Be honest:

Is the appraisal fair? Or are there clear errors/bad comps?

If it's fair, you probably overpaid. Accept it. If it's clearly wrong, challenge it (Option 3).

Step 4: Gauge seller's motivation

Ask your agent:

  • Why is the seller selling?
  • Do they have other offers?
  • Are they in a hurry?
  • What's their financial situation?

Motivated seller = more likely to negotiate (Option 2). Stubborn or patient seller = less likely to budge.

Step 5: Consider the market trajectory

Is the market:

  • Getting hotter? (Maybe paying the gap makes sense)
  • Cooling off? (Maybe walk away and find better deal later)
  • Stable? (Negotiate and split the difference)

Step 6: Trust your gut

After analyzing everything, how do you feel?

Excited to move forward? Proceed. Sick to your stomach? Walk away.

Your intuition matters.

Real Decision Examples

Example 1: The Easy Call

Offer: $525k Appraisal: $495k Gap: $30k

Buyer situation:

  • Has $50k in savings beyond down payment
  • Loves the house
  • Market appreciating 7% annually
  • Seller won't negotiate

Decision: Pay the gap and close.

Reasoning: Has the cash, believes in long-term value, doesn't want to start over.

Example 2: The Negotiation Win

Offer: $390k Appraisal: $370k Gap: $20k

Buyer situation:

  • Has $15k extra cash available
  • Seller relocating for job next month
  • House has been under contract 30 days

Decision: Negotiate. Offered to split the gap at $380k.

Result: Seller accepted. Closed at $380k. Buyer paid $10k extra, saved $10k from original offer.

Example 3: The Walk Away

Offer: $610k Appraisal: $565k Gap: $45k

Buyer situation:

  • Only has $10k extra cash
  • Offered in bidding war (got emotional)
  • Now realizes they overpaid
  • Seller won't negotiate

Decision: Walk away using appraisal contingency.

Result: Got earnest money back. Found different house two months later for $580k that appraised fine.

Example 4: The Successful Challenge

Offer: $455k Appraisal: $430k Gap: $25k

Buyer situation:

  • Reviewed appraisal, found appraiser used foreclosure comp
  • Home was recently renovated (receipts available)
  • Has $20k extra cash if needed

Decision: Challenge the appraisal first.

Result: Submitted three better comps and renovation receipts. Appraiser revised to $445k. Negotiated with seller to $450k. Closed with only $5k gap to cover.

What About FHA and VA Loans?

FHA Loans and Low Appraisals

FHA appraisals are typically more conservative. FHA also requires the appraiser to note any repairs needed for health/safety.

If FHA appraisal comes in low:

  • Same four options apply
  • But seller might also need to make repairs for FHA approval
  • This gives you more negotiating leverage

FHA appraisals also "stick to the property" for 120 days, meaning if you walk away, the next FHA buyer will get the same low appraisal.

VA Loans and Low Appraisals

VA appraisals are also conservative and stick to the property for 6 months.

Veterans have a special protection: The VA requires lenders to include a "VA amendatory clause" that essentially says if the appraisal comes in low, the veteran can walk away or renegotiate.

If you're using a VA loan and appraisal comes in low, you have strong leverage to renegotiate with the seller.

The Bottom Line

A low appraisal feels like a disaster. But it's actually the market giving you important information:

Either the house isn't worth what you offered, or the appraiser made a mistake.

Your job is to figure out which, then decide:

  • Can you and want to pay the difference? Pay it.
  • Can you negotiate with the seller? Try that.
  • Is the appraisal clearly wrong? Challenge it.
  • None of those work or make sense? Walk away.

There's no universal right answer. It depends on your finances, the gap size, the seller's motivation, and how you feel about the house.

But whatever you decide, decide based on logic and numbers—not sunk cost ("we've already spent $800 on inspection!") or emotion ("we'll never find another house like this!").

You will find another house. And you'll be glad you didn't overpay for this one.

Make Data-Driven Offers to Avoid This Situation

The best way to handle a low appraisal is to not get one in the first place.

Before you make an offer, know what the house is actually worth. Not what the seller is asking. Not what you're willing to pay emotionally. What the market data says it's worth.

Analyze Your Next Property with offer.guide

Get a personalized analysis in 5 minutes:

  • Fair market value based on recent comparable sales
  • Risk assessment for appraisal issues
  • Two offer strategies (conservative vs. competitive)
  • Walk-away price to protect yourself
  • Monthly payment projections

Your first analysis is free. No credit card required.

Because the best way to deal with a low appraisal is to never make an offer that will appraise low in the first place.

Make smarter offers.

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