DSCR Appraisal Came in Low: 5 Options

You're under contract. You've submitted your DSCR loan application. Then the appraisal comes back $15,000–$30,000 below the purchase price. Now what?

Low appraisals happen in 10–15% of DSCR transactions. Here are your five options, ranked from best to worst.

Option 1: Renegotiate the Purchase Price

How It Works

Contact the seller and request a price reduction to match the appraised value.

Example:

• Purchase price: $250,000
• Appraised value: $235,000
• Gap: $15,000
• Request: Reduce price to $235,000

When This Works

• Seller is motivated (job relocation, financial distress, estate sale)
• Property has been on market 30+ days
• You have an appraisal contingency in your contract
• Market is softening (seasonal slowdown, rising rates)
• Comparable sales support the lower appraisal

When It Doesn't

• Multiple offers on the property
• Seller has other backup buyers
• Hot market / spring buying season
• Seller believes appraisal is wrong and won't budge

How to Approach It

Don't demand — propose a solution:

"The appraisal came in at $235,000. I'm still committed to buying this property. Would you consider meeting at $235,000, or splitting the difference at $242,500?"

Splitting the difference is often acceptable to sellers who want the deal to close.

Option 2: Bring Additional Cash

How It Works

Keep the purchase price at $250,000 but bring extra down payment to compensate for the lower appraisal.

Example:

• Purchase price: $250,000
• Appraised value: $235,000
• DSCR loan (75% LTV on appraised value): $176,250
• Your cash needed: $250,000 – $176,250 = $73,750

Instead of the planned $62,500 down payment (25% of $250,000), you're bringing $73,750 — an extra $11,250.

When This Makes Sense

• You believe the appraisal is wrong and the property is worth $250K
• You have extra capital available
• The deal's returns still work at the higher down payment
• You plan to refinance in 1–2 years when values increase

The Math

Does bringing extra cash destroy your returns?

The return drops but may still be acceptable. Run the numbers before committing.

Option 3: Challenge the Appraisal (Reconsideration of Value)

How It Works

Submit a Reconsideration of Value (ROV) request to your lender with evidence that the appraisal is inaccurate.

What to provide:

• Better comparable sales (recent sales the appraiser missed)
• Data showing the comps used were poor matches
• Property improvements not reflected in the appraisal
• Market data showing values higher than appraised
• Photos of the property vs. inferior comps

When This Works

• Appraiser used poor comps (wrong neighborhood, different property type, distressed sales)
• Property has recent updates/renovations not fully credited
• Clear errors in the appraisal report (wrong square footage, missing features)
• Recent sales data supports your purchase price

When It Doesn't

• Appraiser used appropriate comps and the value is accurate
• No better comps exist in the market
• The market is genuinely declining

Timeline

ROV typically adds 7–14 days to your closing timeline. If you're close to your contract deadline, request an extension from the seller.

Success Rate

About 10–20% of ROV requests result in a value increase. It's worth trying if you have strong evidence, but don't count on it.

Option 4: Get a Second Appraisal

How It Works

Some DSCR lenders allow you to order a second appraisal at your expense ($400–$700).

If the second appraisal comes in at or above the purchase price, the lender may use that value instead.

When This Works

• You're confident the first appraisal is wrong
• You can afford another $500–$700 and a 7–10 day delay
• The first appraisal had obvious errors or poor comps

The Risk

If the second appraisal also comes in low (or even lower), you've wasted time and money. Some lenders will use the lower of the two appraisals.

Lender Policy

Not all DSCR lenders allow second appraisals. Ask upfront before ordering one.

Option 5: Walk Away

When to Walk

• Appraisal is accurate and the seller won't budge
• You don't have extra cash and can't make the deal work
• The deal only penciled at $250K — at $235K+extra cash, it doesn't work
• You have an appraisal contingency (you get your earnest money back)

Costs of Walking Away

• Lost time (30–45 days in due diligence)
• Lost inspection fee ($400–$600)
• Lost appraisal fee ($400–$700)
• Opportunity cost (other properties passed on)

Earnest Money

If you have an appraisal contingency and the appraisal comes in low, you can cancel the contract and receive your earnest money back. Without a contingency, you lose your earnest money.

How to Prevent Low Appraisals

Before You Offer

1. Research comparable sales yourself — Use MLS data, Zillow, Redfin
2. Don't overpay in hot markets — Appraisers use closed sales (30–90 days old). If you're bidding 10% over comps, the appraisal may not support it.
3. Include an appraisal contingency — Protects you if the appraisal comes in low
4. Ask your agent for a CMA (Comparative Market Analysis) — Gives you a reality check on value

During the Appraisal

• Provide the appraiser with a list of strong comparable sales
• Highlight any recent upgrades (new roof, HVAC, kitchen)
• Ensure the property is clean and accessible
• Don't harass the appraiser (it backfires)

Frequently Asked Questions

Can I choose my own appraiser for a DSCR loan?

No. The lender orders the appraisal through an Appraisal Management Company (AMC) to ensure independence. You can't influence who is assigned.

Will a low appraisal affect my DSCR ratio?

Not directly. DSCR is calculated on the rent estimate (1007 schedule), not the appraised value. But a low appraisal reduces your loan amount, which may require more down payment.

How often do DSCR appraisals come in low?

About 10–15% of the time, especially in competitive markets where buyers are bidding above recent comparable sales.

Should I waive the appraisal contingency to win the deal?

Only if you're prepared to bring extra cash or walk away and lose your earnest money. Waiving the appraisal contingency is risky in uncertain markets.

Can I use the low appraisal to negotiate repairs?

Yes. If the appraisal comes in low AND identifies needed repairs, you can request the seller address those repairs or credit you at closing.

The Bottom Line

A low appraisal isn't a deal-killer — it's a negotiation point. Start with renegotiation (seller reduces price or splits the difference). If that fails, decide whether bringing extra cash makes financial sense. Challenge the appraisal if you have strong evidence it's wrong. And if none of those work, walk away and find a better deal.

The key: protect yourself with an appraisal contingency in your purchase contract. It's your safety net when values don't align with prices.

Get accurate DSCR deal analysis with HonestCasa.