What to Do When Your Home Appraisal Comes Back Low
What to Expect in This Blog Post
- What a low home appraisal means for buyers
- Why appraisals can come in below the purchase price
- What to do when an appraisal is lower than your offer
- How buyers can request a reconsideration of value
- Whether you can renegotiate the purchase price
- When bringing additional cash to closing may make sense
- How a local mortgage lender can help you navigate a low appraisal
TABLE OF CONTENTS:
- What Does a Low Home Appraisal Mean?
- Why Would a Home Appraise for Less Than the Purchase Price?
- First, Review the Appraisal
- Request a Reconsideration of Value
- Ask the Seller to Lower the Price
- Can You Still Buy the Home If the Appraisal Is Low?
- Can You Change Your Mortgage to Solve an Appraisal Gap?
- What If the Appraisal Is Simply Wrong?
- Don’t Let a Low Appraisal Automatically Kill the Deal
- Why Local Mortgage Expertise Matters When an Appraisal Comes in Low
- Why You Can Trust the Treadstone Division of Neighborhood Loans
- FAQs
What Does a Low Home Appraisal Mean?
You’ve found the house, negotiated the price, signed the purchase agreement, and started imagining where the couch is going to go.
Then the appraisal comes back … and the value is lower than what you agreed to pay. Not exactly the plot twist anyone wants.
A home appraisal is an independent opinion of the property’s market value. Mortgage lenders use the appraised value as part of determining whether the property provides sufficient collateral for the loan.
For example, imagine you agree to buy a Michigan home for $300,000, but the appraisal comes back at $285,000. You now have a $15,000 gap between the purchase price and the appraised value.
That doesn’t automatically mean the deal is dead. It does mean you’ll need to figure out how to address the difference, though.
Why Would a Home Appraise for Less Than the Purchase Price?
A low appraisal doesn’t necessarily mean something is wrong with the house. The purchase price and appraised value are simply two different measurements.
The purchase price is what a willing buyer and seller agreed to pay. The appraisal is an appraiser’s opinion of the property’s market value based on factors such as comparable sales, the property’s characteristics, condition, and the surrounding market.
An appraisal can come in low when:
- Recent comparable sales don’t support the agreed-upon price
- Home prices have changed quickly
- The buyer offered above the asking price
- The property has unusual features that are difficult to compare
- The appraiser finds condition issues
- There aren’t enough recent comparable sales nearby
In a competitive market, buyers sometimes offer more than a home’s recent comparable sales would suggest in order to win the property. That’s where an appraisal gap can happen.
First, Review the Appraisal
Before panicking, take a close look at the appraisal report.
For first-lien mortgage applications, borrowers are entitled to receive a free copy of the appraisal, and lenders generally must provide it promptly after completion and no later than three days before closing.
Review the comparable properties used by the appraiser. Look at the property’s features, condition, square footage, updates, location, and other details. Do the comparable sales actually resemble the home you’re buying?
If you believe important information was overlooked or there are factual errors in the report, talk to your lender about the next steps.
Request a Reconsideration of Value
If you believe the appraisal doesn’t accurately reflect the home’s market value, you may be able to request a reconsideration of value (ROV).
An ROV gives the borrower an opportunity to provide information that may have been missed or incorrectly considered in the original appraisal.
That might include:
- More appropriate comparable sales
- Corrections to factual errors
- Information about significant property improvements
- Additional market data
- Other relevant information supporting the property’s value
Fannie Mae requires lenders to maintain policies and procedures for borrower-initiated ROVs on loans requiring an appraisal. The request must address substantive issues with the valuation rather than simply saying, “We don’t like the number.”
In other words, you need evidence, not just a strong feeling that your house is worth more.
Ask the Seller to Lower the Price
If the appraisal supports a lower value, one of the simplest solutions is asking the seller to reduce the purchase price.
Using the earlier example, if you agreed to pay $300,000 but the home appraises for $285,000, the seller may agree to bring the purchase price down. This is often the cleanest solution because you’re no longer paying more than the appraised value.
The CFPB specifically recommends considering a price reduction when a home appraises for less than the sale price. Of course, the seller doesn’t have to agree.
If you’re in a competitive market, the seller may have other interested buyers, or may believe the appraisal doesn’t reflect the home’s true value. That’s when your other options become important.
Can You Still Buy the Home If the Appraisal Is Low?
If you really want the home and the seller won’t lower the price, you may choose to cover some or all of the appraisal gap with additional cash.
For example:
| Example | Amount |
|---|---|
| Purchase price | $300,000 |
| Appraised value | $285,000 |
| Appraisal gap | $15,000 |
This example is for illustrative purposes only. Actual rates, payments, and terms vary based on credit profile, loan amount, market conditions, and individual circumstances. Contact a licensed Loan Officer for a personalized quote. Not a commitment to lend.
Depending on the loan program and your circumstances, you may be able to bring additional funds to make up some or all of that difference.
But there’s an important consideration: you’re effectively paying more than the appraised market value.
That’s not necessarily a bad decision if you believe the property is worth it and you’re comfortable with the additional cash requirement. It does, however, mean you should understand the financial implications before moving forward.
Can You Change Your Mortgage to Solve an Appraisal Gap?
Sometimes changing the financing structure can help, but don’t assume it will magically make the appraisal gap disappear.
Your lender can review whether a different loan program, down payment, or loan structure makes sense based on the updated numbers.
The key is to have that conversation early.
A lower appraisal can affect your loan-to-value ratio and the amount you’re able to finance, so your mortgage professional needs to know exactly where the numbers stand before you make a final decision.
What If the Appraisal Is Simply Wrong?
Appraisers are required to develop supported opinions of market value, and lenders aren’t allowed to pressure appraisers to reach a particular value. Fannie Mae also provides procedures for addressing deficiencies and, when appropriate, obtaining a review or replacement appraisal.
That doesn’t mean every low appraisal gets changed. If the appraisal is well-supported by the available market data, the value may remain exactly where it is.
But if there are legitimate errors, missing information, or better comparable sales that weren’t considered, it’s worth discussing an ROV with your lender.
Don’t Let a Low Appraisal Automatically Kill the Deal
A low appraisal can feel like a major problem, but it’s really a decision point.
You have several potential paths:
- Ask the seller to reduce the price.
- Request a reconsideration of value if there are legitimate concerns with the appraisal.
- Negotiate another solution with the seller.
- Bring additional funds to cover some or all of the appraisal gap.
- Review your financing options with your lender.
- Walk away if the numbers no longer make financial sense and your contract allows it.
The right answer depends on the size of the gap, your financial position, the local market, and how much you want the property.
Most importantly, don’t make a decision based solely on emotion. Yes, you love the house. We get it. But you also need to love the mortgage payment.
Why Local Mortgage Expertise Matters When an Appraisal Comes in Low
A low appraisal is one of those moments when having a responsive mortgage lender really matters. Your Loan Officer can help you understand how the lower value affects your financing, walk through the appraisal report with you, and explain which options may be available.
That’s particularly valuable in Michigan, where local market conditions can vary significantly between Grand Rapids, Detroit, Lansing, Kalamazoo, Traverse City, and smaller communities.
The more familiar your lender is with the market and your loan program, the easier it is to have an informed conversation about what happens next.
Why You Can Trust the Treadstone Division of Neighborhood Loans
Since 2003, the Treadstone Division of Neighborhood Loans has helped thousands of Michigan buyers navigate the mortgage process, including the unexpected moments that can happen between getting an offer accepted and reaching the closing table.
Our Loan Officers help buyers understand how appraisals affect financing, what options may be available when values come in lower than expected, and how to make decisions based on the complete financial picture.
We don’t believe a bump in the road should automatically derail your home purchase. Sometimes the solution is negotiating with the seller. Sometimes it’s reviewing the appraisal. Sometimes it’s adjusting the financing—or deciding that the numbers no longer make sense.
Our job is to help you understand those choices so you can make the decision that’s right for you.
FAQs
What happens if my home appraisal comes in lower than the purchase price?
A low appraisal creates a difference between the price you agreed to pay and the property’s appraised value. Depending on your circumstances, you may be able to negotiate a lower purchase price, request a reconsideration of value, bring additional cash to closing, adjust your financing, or cancel the transaction if your contract allows it.
Can I challenge a low home appraisal?
If you believe the appraisal contains factual errors, overlooked relevant information, or uses inappropriate comparable sales, you can ask your lender about requesting a reconsideration of value. Fannie Mae requires lenders to have a borrower-initiated ROV process for applicable loans.
Who pays the appraisal gap?
The buyer and seller can negotiate how to address an appraisal gap. A seller may agree to lower the purchase price, while a buyer may choose to bring additional funds to closing. The purchase contract and mortgage program also matter.
Can I still get a mortgage if the appraisal is low?
A low appraisal doesn’t automatically prevent you from getting a mortgage. However, it can affect the amount you can finance and may require changes to the transaction or additional funds from the buyer.
Should I pay more than the appraised value of a home?
That depends on your financial situation and how strongly you believe the property is worth the agreed-upon price. Paying more than the appraised value means you are accepting an appraisal gap, so it’s important to understand how the decision affects your upfront costs, equity, and overall mortgage.
Can the seller lower the price after a low appraisal?
A low appraisal can give the buyer a basis for asking the seller to reduce the purchase price. Whether the seller agrees depends on the contract, market conditions, and the seller’s willingness to renegotiate. The CFPB identifies negotiating a lower price as one potential response to a low appraisal.
A home appraisal is an independent opinion of the property's market value.
