Last Updated: January 2026

You've found your dream home, negotiated the price, and everything seems perfect—until the appraisal comes back lower than expected. A low home appraisal can feel like a gut punch, but it doesn't have to derail your home purchase. Understanding your options and acting quickly can save the deal.

When a home appraisal comes in low, the lender will only approve a mortgage based on the appraised value, not the agreed purchase price. This creates an appraisal gap—the difference between what you agreed to pay and what the bank says the home is worth. For example, if you're under contract for $400,000 but the appraisal comes in at $380,000, you're facing a $20,000 gap.

In this guide, we'll walk you through exactly what happens when an appraisal comes in low, explain your 8 main options, and help you decide the best path forward. Whether you're a first-time home buyer or an experienced investor, knowing how to handle a low appraisal is essential in today's competitive market.

Understanding Low Home Appraisals

What Causes an Appraisal to Come in Low?

Before exploring your options, it helps to understand why appraisals sometimes come in below the contract price. Common causes include:

• Rapid market appreciation: In hot markets, home prices can rise faster than comparable sales data can support
• Bidding wars: Competition may push the agreed price above market value
• Limited comparable sales: Unique properties or neighborhoods with few recent sales make accurate valuations difficult
• Appraiser unfamiliarity: An out-of-area appraiser may not understand local market nuances
• Property condition issues: Problems discovered during the appraisal inspection can reduce value
• Outdated comparables: Using sales data from months ago in a rising or falling market

How Often Do Home Appraisals Come in Low?

According to industry data, approximately 8-10% of home appraisals come in below the contract price. However, this rate varies significantly based on market conditions:

Market Type	Low Appraisal Frequency
Hot seller's market	15-20%
Balanced market	8-10%
Buyer's market	3-5%
Rural/unique properties	12-15%

During the pandemic housing boom of 2020-2022, low appraisals became extremely common as prices outpaced historical data. Today's market has stabilized somewhat, but appraisal gaps remain a regular occurrence in competitive areas.

Your 8 Options When an Appraisal Comes in Low

When faced with a low home appraisal, you have several paths forward. The right choice depends on your financial situation, how much you want the home, and market conditions.

1. Renegotiate the Purchase Price

The most common solution is to ask the seller to lower the price to match the appraised value. This approach:

• Keeps the deal together without additional out-of-pocket costs
• Uses the appraisal as leverage for negotiation
• Works best in buyer's markets or when the seller is motivated

How to approach it: Have your real estate agent present the appraisal findings professionally. Frame it as a third-party, objective assessment rather than a negotiating tactic. Some sellers will agree to lower the price entirely; others may split the difference.

2. Cover the Appraisal Gap in Cash

If you have the financial resources and really want the home, you can pay the difference between the appraised value and purchase price in cash. This is called covering the "appraisal gap."

Example: If the home is appraised at $380,000 but you agreed to pay $400,000, you would:

• Get a mortgage based on $380,000 (the appraised value)
• Pay the $20,000 gap in additional cash at closing
• Still make your original down payment on top of that

When this makes sense:

• You've already invested significant time and money in the purchase
• The home has unique features worth the premium
• You plan to stay long-term and believe values will appreciate
• Inventory is extremely limited and you've lost other bids

3. Request a Reconsideration of Value (Dispute the Appraisal)

If you believe the appraisal contains errors or missed important information, you can formally dispute the appraisal through a Reconsideration of Value (ROV) request.

Grounds for disputing an appraisal:

• Factual errors (wrong square footage, bedroom count, or lot size)
• Missing comparable sales that support a higher value
• Inappropriate comparables (comparing a single-family home to condos)
• Failure to account for recent upgrades or renovations
• Appraiser unfamiliarity with the neighborhood

How to file a dispute:

1. Review the appraisal report carefully for errors
2. Gather supporting documentation (recent comparable sales, receipts for upgrades)
3. Work with your real estate agent to compile the evidence
4. Submit the ROV request through your lender
5. Wait 3-7 business days for the response

Success rate: According to lender data, approximately 20-30% of appraisal disputes result in a value increase. The key is providing concrete, documented evidence rather than emotional arguments.

4. Request a Second Appraisal

In some cases, you can request a new appraisal from a different appraiser. However, this option has limitations:

• Not all lenders allow second appraisals
• You'll pay for an additional appraisal ($400-$700+)
• There's no guarantee the second appraisal will be higher
• Some loan programs (like FHA) have specific rules about second appraisals

A second appraisal makes the most sense when you have strong evidence that the first appraiser made significant errors or was unfamiliar with the area.

5. Split the Difference with the Seller

A common compromise is for both parties to share the appraisal gap. This keeps the deal moving forward while acknowledging that neither side bears full responsibility.

Example: On a $20,000 appraisal gap:

• Seller reduces price by $10,000
• Buyer brings an additional $10,000 cash to closing

This approach often works because it demonstrates good faith from both parties and acknowledges the uncertainty inherent in property valuation.

6. Increase Your Down Payment

Another approach is to restructure your financing by increasing your down payment. This changes the loan-to-value ratio and may allow the lender to proceed.

How it works: If you were planning to put 10% down on a $400,000 home ($40,000), but the appraisal came in at $380,000, you might increase your down payment to $60,000. This brings your loan amount to $340,000, which keeps the LTV ratio acceptable for the lender.

This differs from simply covering the gap because you're changing your financing structure rather than paying over appraised value.

7. Walk Away Using Your Appraisal Contingency

If your purchase contract includes an appraisal contingency (and most do), you have the right to walk away from the deal and get your earnest money back if the appraisal comes in low.

When walking away makes sense:

• The appraisal gap is substantial (10%+ of purchase price)
• You don't have cash to cover the difference
• The seller refuses to negotiate
• You discover the home has more issues than expected
• Market conditions suggest prices may decline

8. Wait and Reappraise Later

In rapidly appreciating markets, some buyers choose to delay and request a new appraisal after more comparable sales have closed. This risky strategy depends on:

• The seller agreeing to extend the contract
• New comparable sales supporting a higher value
• Maintaining your loan approval during the delay

This approach is uncommon but can work when the appraisal gap is caused by a lack of recent comparable sales rather than an overpriced property.

Special Considerations by Loan Type

FHA Loans and Low Appraisals

FHA appraisals come with additional considerations. The appraisal stays with the property for 120 days, meaning:

• If you walk away, the next FHA buyer will see the same low appraisal
• Getting a second FHA appraisal is more difficult
• The property must also meet FHA health and safety standards

VA Loans and Low Appraisals

VA appraisals involve a Tidewater process—appraisers must notify the lender if the value will come in low, giving parties time to provide additional comparables before the final report. VA loans also have a "VA amendment" that protects buyers from losing their earnest money if the appraisal is low.

Conventional Loans and Low Appraisals

Conventional loans typically offer the most flexibility. You can request second appraisals more easily, and there are fewer property condition requirements. However, the appraisal process and dispute options are similar.

How to Prevent Low Appraisals

While you can't control appraisal outcomes, several strategies can help reduce the risk:

For Buyers

• Research comparable sales before making an offer—don't rely solely on emotions or FOMO
• Include an appraisal gap clause in your offer, specifying how much you're willing to cover
• Work with a local real estate agent who knows neighborhood values
• Avoid waiving the appraisal contingency unless you have significant cash reserves

For Sellers

• Provide the appraiser with a list of upgrades and their costs
• Prepare a comparative market analysis showing recent comparable sales
• Ensure the property is clean and accessible for the appraisal inspection
• Disclose any recent improvements that add value

Appraisal Gap Clauses: Protecting Your Offer

In competitive markets, many buyers include an appraisal gap clause (also called appraisal gap coverage) in their purchase offer. Here's how it works:

Benefits of appraisal gap coverage:

• Makes your offer more competitive without waiving contingencies entirely
• Gives sellers confidence the deal will close
• Limits your financial exposure to a predetermined amount
• Still allows you to walk away if the gap is too large

Real-World Example: Handling a Low Appraisal

Let's walk through a realistic scenario to see how these options play out:

The situation: Sarah offered $425,000 on a home, with $42,500 (10%) down. The appraisal came in at $405,000—a $20,000 gap.

Sarah's options:

1. Renegotiate: Ask seller to reduce price to $405,000
2. Cover the gap: Bring an additional $20,000 cash to closing
3. Split it: Propose seller reduces by $10,000; Sarah covers $10,000
4. Dispute: Challenge the appraisal if she finds errors
5. Walk away: Use her appraisal contingency to exit

What happened: Sarah's agent discovered the appraiser used a comparable sale from a less desirable neighborhood. They filed an ROV request with three better comparables. The appraisal was revised to $415,000. Sarah and the seller split the remaining $10,000 gap, and the deal closed successfully.

Working with Your Real Estate Agent

An experienced real estate agent is invaluable when navigating a low appraisal. They can:

• Review the appraisal report for errors or inconsistencies
• Provide comparable sales data to support a dispute
• Negotiate with the seller's agent on your behalf
• Advise whether the home is worth paying above appraised value
• Coordinate with your lender throughout the process
• Help you understand your contractual options

If you're facing a low appraisal and need expert guidance, find a local real estate agent who knows your market.

Frequently Asked Questions

What happens if a home appraisal comes in low?

When a home appraisal comes in below the agreed purchase price, the lender will only approve a loan based on the appraised value. The buyer must then make up the difference in cash, renegotiate the price with the seller, dispute the appraisal, or potentially walk away from the deal if they have an appraisal contingency.

Can you dispute a low home appraisal?

Yes, you can dispute a low appraisal through a Reconsideration of Value (ROV) request. You'll need to provide evidence such as comparable sales the appraiser may have missed, factual errors in the report, or documentation of recent upgrades. Your real estate agent can help compile this information for the dispute.

How often do home appraisals come in low?

According to industry data, approximately 8-10% of home appraisals come in below the contract price. Low appraisals are more common in hot markets with rapid price appreciation, bidding wars, and limited comparable sales data.

Can a seller back out if appraisal is low?

Generally, sellers cannot back out simply because an appraisal is low. However, they can refuse to lower the price, which may cause the deal to fall through if the buyer can't or won't make up the difference. The buyer typically has more exit options through the appraisal contingency.

Should I pay more than appraised value for a house?

Paying more than appraised value is a personal decision based on your financial situation and how much you want the home. Consider factors like available cash reserves, local market conditions, the home's unique features, and your long-term plans. In competitive markets, some buyers strategically pay above appraised value.

What is an appraisal gap clause?

An appraisal gap clause (or appraisal gap coverage) is a contract provision where the buyer agrees to pay the difference between the appraised value and purchase price, up to a specified amount, in cash. This makes offers more attractive in competitive markets.

How long does an appraisal dispute take?

An appraisal dispute or Reconsideration of Value typically takes 3-7 business days, though it can extend to 2 weeks in complex cases. During this time, buyers should work closely with their lender and real estate agent to gather supporting documentation.

Key Takeaways

Dealing with a low home appraisal is stressful, but it's a common challenge with multiple solutions. Here's what to remember:

• Don't panic—8-10% of appraisals come in low, and most deals still close
• Review the appraisal carefully for errors before deciding your next step
• Renegotiating with the seller is the most common and often successful approach
• Disputing the appraisal works about 20-30% of the time with proper documentation
• Your appraisal contingency protects you if you need to walk away
• Work with an experienced agent who can guide you through the process

Remember, an appraisal is one professional's opinion of value at a specific point in time. It's an important data point, but it doesn't necessarily reflect what the home is worth to you or what the market will bear. Make your decision based on your financial situation, how much you want the home, and the advice of your real estate team.