Appraisal Came In Low: What to Do Next
By Keith Lopez Mortgage Loan Originator · NMLS #2814077 Reviewed by Keith Lopez
Quick answer
What are my options when the home appraisal comes in lower than the purchase price?
When an appraisal comes in below the agreed purchase price, you generally have four paths: ask the seller to lower the price, pay the difference out of pocket, request a reconsideration of value from the appraiser, or walk away using your appraisal contingency. Which option makes sense depends on your contract terms, your cash reserves, and how motivated both sides are to close.
- A low appraisal does not automatically kill a deal. It opens a negotiation.
- Lenders base the loan amount on the lower of the appraised value or the purchase price, so the gap becomes your problem to solve.
- A reconsideration of value (ROV) lets you formally challenge the appraisal with comparable sales data.
- Your appraisal contingency gives you a legal exit if you cannot resolve the gap.
- Covering the gap out of pocket requires extra cash at closing and may affect your down payment calculations.
- Working with an experienced loan officer early helps you understand how an appraisal gap could affect your financing before you make an offer.
Why Does a Low Appraisal Create a Problem?
When you finance a home purchase, your lender orders an independent appraisal to confirm the property is worth at least what you agreed to pay. If the appraised value comes back lower than the purchase price, the lender will only lend against the appraised value. That gap between the two numbers is not covered by your loan.
For example, if you agreed to pay $350,000 but the appraisal comes in at $330,000, your lender calculates your loan-to-value ratio using $330,000. You are now responsible for covering that $20,000 difference in addition to your planned down payment, unless you and the seller find another solution.
This situation is more common in competitive markets where buyers sometimes offer above asking price to win a bidding war. Understanding your options before you are in this position is part of a solid home-buying plan. The Mortgage Roadmap at our mortgage roadmap walks through each stage of the purchase process, including what happens after the appraisal.
What Are Your Options When the Appraisal Is Low?
Option 1: Renegotiate the purchase price. This is the most common resolution. You or your real estate agent goes back to the seller with the appraisal report and asks them to reduce the price to match the appraised value. Sellers are not required to agree, but many would rather close the deal than start over with a new buyer who may face the same appraisal result.
Option 2: Cover the appraisal gap out of pocket. If you have the cash and you believe the home is worth the higher price, you can pay the difference at closing. This means your total cash needed increases by the gap amount. Make sure you discuss this with your loan officer first, because it can affect how your down payment percentage is calculated and whether any gift funds or assistance programs are still applicable.
Option 3: Request a reconsideration of value (ROV). Under CFPB and GSE guidelines, borrowers have the right to ask the lender to submit an ROV to the appraiser. You or your agent can provide recent comparable sales that you believe the appraiser missed or weighted incorrectly. The appraiser reviews the new data and may or may not revise the value. This process takes additional time, so factor that into your closing timeline.
Option 4: Walk away using your appraisal contingency. Most standard purchase contracts in NC, SC, and GA include an appraisal contingency. If the appraisal comes in low and you cannot reach an agreement with the seller, this contingency typically allows you to exit the contract and recover your earnest money deposit. Review your specific contract language with your real estate attorney or agent before assuming this protection applies.
A split approach is also possible. Some buyers negotiate a partial price reduction and cover the remaining gap themselves. The right combination depends on your budget, your attachment to the property, and the seller's flexibility. Keith Lopez (NMLS #2814077) at Waypoint Mortgage can help you model each scenario so you understand the cash and loan implications before you decide.
How Does a Reconsideration of Value Work?
A reconsideration of value is a formal request submitted through your lender asking the appraiser to review additional information. Fannie Mae and Freddie Mac both have policies supporting borrower ROV rights, and lenders are required to have a process for handling these requests. You cannot contact the appraiser directly. All communication goes through the lender.
To support an ROV, your agent should pull recent comparable sales (comps) that closed near the appraisal date and are similar in size, condition, and location to the subject property. If the appraiser used comps from a different neighborhood or from sales that are older than typical market standards, those are legitimate points to raise.
An ROV is not a guarantee of a higher value. The appraiser may review the data and stand by the original conclusion. But it is a structured, no-cost step worth taking before you move to the other options. Ask your loan officer to explain the lender's specific ROV timeline so you can plan accordingly.
What Happens to Your Loan If You Cover the Gap?
If you decide to cover the appraisal gap out of pocket, your lender still calculates the loan amount based on the appraised value, not the contract price. So your loan-to-value ratio, your mortgage insurance requirements (if any), and your down payment percentage all shift based on the lower appraised value.
This matters practically. If you planned a 5 percent down payment on a $350,000 purchase price, that was $17,500. Now your lender is working from a $330,000 appraised value. Your 5 percent down on that value is $16,500, but you still owe the seller $350,000. You need $16,500 for the down payment plus the $20,000 gap, totaling $36,500 in cash at closing instead of $17,500. That is a significant change.
Before committing to cover a gap, verify with your loan officer that your remaining cash reserves still meet the lender's requirements after closing. Some loan programs require a minimum number of months of reserves post-closing. You can explore purchase loan options at our Home Purchase page to understand how different programs handle appraisal gaps.
Should You Walk Away or Push Through?
There is no universal right answer. Walking away protects your earnest money (assuming your contingency is intact) and keeps you from overpaying relative to what the market data supports. Pushing through makes sense if you have done your own research, believe the appraiser missed something meaningful, or simply value the specific property enough to pay above appraised value.
In NC and GA, real estate closings are handled by attorneys, which means you have a licensed professional reviewing your contract documents at the closing table. That is a good time to ask questions, but it is not the right time to be learning about your appraisal contingency for the first time. Read your contract carefully with your agent before the appraisal even happens.
If you are unsure how to evaluate the situation, a Mortgage Strategy Session is a low-pressure way to talk through the numbers. You can schedule one at https://calendly.com/klopez-nexalending/30min.
Frequently asked questions
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Can the seller refuse to lower the price after a low appraisal?
Yes, the seller can refuse. They are not legally required to reduce the price just because the appraisal came in low. If they refuse and you cannot cover the gap, your appraisal contingency may allow you to exit the contract without losing your earnest money. Review your contract terms with your agent or attorney to confirm what protections apply.
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How long does a reconsideration of value take?
Timelines vary by lender and appraiser workload, but an ROV typically adds several business days to a week or more to the process. Your loan officer can give you a realistic estimate based on the lender's current workflow. Factor this into your closing date before submitting the request.
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Does a low appraisal mean the home is overpriced?
Not necessarily. Appraisals are based on recent comparable sales, and in fast-moving markets, closed sales data can lag behind current buyer demand. The appraiser may also have used comps that are not truly comparable. A low appraisal is a data point, not a final verdict on the home's worth, which is why a reconsideration of value is sometimes worth pursuing.
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What if I waived my appraisal contingency to win the offer?
Waiving the appraisal contingency means you agreed to proceed regardless of the appraised value. In that case, you are generally obligated to cover the gap or risk losing your earnest money if you back out. This is a significant financial risk, so it is important to understand what you are agreeing to before waiving any contingency.
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Can I get a second appraisal?
In most cases, you cannot simply order a second appraisal through the same lender to replace the first one. Lenders are required to maintain appraiser independence under federal rules. However, if you believe the appraisal has a factual error or missed key comps, the ROV process is the appropriate channel. In some limited circumstances, a lender may order a second appraisal, but that decision belongs to the lender, not the borrower.
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Does a low appraisal affect my interest rate?
Not directly. Your interest rate is primarily tied to your credit profile, loan type, loan-to-value ratio, and market conditions at the time of rate lock. However, if covering the gap changes your loan-to-value ratio or down payment percentage, that could indirectly affect pricing. Talk to your loan officer about how any changes to your loan structure might affect your rate.
Related reading
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- Getting started Moving to the Carolinas: A Mortgage Guide for Out-of-State Buyers Relocating to North Carolina or South Carolina? This guide walks out-of-state buyers through relocation income documentation, remote attorney closings, and realistic timelines for Charlotte, Charleston, and Greenville.
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