Your [Home Appraisal](/blog/appraisal-process-explained) Came in Low: 7 Options With Pros and Cons

You found the perfect home. You negotiated the price. You got through inspection. Everything is on track — and then you get the call: "The appraisal came in low."

Your stomach drops. Your lender can't finance more than the appraised value. The seller expects the agreed price. And your closing date is three weeks away.

Take a breath. This happens more often than you think — roughly 8-10% of appraisals come in below the contract price. And you have more options than your initial panic suggests.

I've navigated dozens of low-appraisal situations on both sides of the transaction. Here are your seven options, ranked from most to least common, with honest pros and cons for each.

First: Why Do Appraisals Come in Low?

Before we fix it, let's understand why it happens:

• Rising markets outpace data. Appraisers use recent comparable sales, which are always backward-looking. In a fast-appreciating market, closed comps from 3-6 months ago may not reflect current values.
• Limited comparables. In rural areas or unique property types, there simply aren't enough similar recent sales to support the price.
• Appraiser unfamiliarity with the area. Appraisers sometimes work outside their primary market and miss neighborhood nuances that affect value.
• Bidding war premiums. When multiple offers push a price above market, the appraisal often brings it back to earth.
• Appraisal methodology. Appraisers have strict guidelines (USPAP standards) that sometimes don't capture value the way buyers and sellers perceive it.

Understanding the why helps you choose the right response.

The 7 Options

Option 1: Negotiate the Price Down to Appraised Value

How it works: You go back to the seller and ask them to reduce the purchase price to match the appraisal. This is the most straightforward solution and the one buyers attempt first.

Script for your agent:

"The independent appraisal has valued the property at $[appraised value]. Our lender will only finance up to this amount. We remain committed to purchasing the property and would like to propose adjusting the purchase price to $[appraised value] to move forward with our current financing terms."

Pros:

• ✅ You don't pay more than the home is worth (according to an independent third party)
• ✅ Preserves your cash (no need to cover a gap out of pocket)
• ✅ Simple — no complex restructuring needed

Cons:

• ❌ Seller may refuse, especially in a competitive market
• ❌ If the seller has backup offers at the original price, you have little leverage
• ❌ Can feel adversarial after a collaborative negotiation

Best when: The market is cooling, the property has been on market for 30+ days, or the seller is motivated by timeline.

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Option 2: Split the Difference

How it works: You and the seller each absorb part of the appraisal gap. If the price was $500,000 and the appraisal came in at $480,000, you might agree on $490,000. You'd cover the $10,000 gap between the new price and appraised value in cash.

Script for your agent:

"We understand this is disappointing for both parties. We'd like to propose meeting in the middle — adjusting the purchase price to $[midpoint] and we'll bring the additional $[gap amount] as cash to cover the difference between the appraised value and the new price. This way we both share the adjustment and keep the deal moving forward."

Pros:

• ✅ Shows good faith from both sides
• ✅ Higher chance of acceptance than asking for the full reduction
• ✅ Keeps the deal alive

Cons:

• ❌ You're paying more than appraised value (lender finances appraised value; you cover the gap in cash)
• ❌ Requires additional cash at closing
• ❌ You start with [negative equity](/blog/negative-equity-explained) on paper

Best when: Both parties want the deal to close, and the gap is moderate ($10,000-$25,000).

Cash required calculation:

• Agreed price: $500,000
• Appraised value: $480,000
• New negotiated price: $490,000
• Loan based on: $480,000 (appraised value)
• Cash gap you cover: $490,000 - $480,000 = $10,000 additional cash at closing
• Plus your original down payment on $480,000

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Option 3: Cover the Full Appraisal Gap in Cash

How it works: You pay the agreed purchase price, bringing extra cash to cover the difference between the appraised value and the purchase price. Your lender finances based on the appraised value; you fund the rest.

Pros:

• ✅ No renegotiation needed — deal proceeds as agreed
• ✅ Seller is happy — they get their price
• ✅ In a competitive market, this may be your only option to secure the home

Cons:

• ❌ You're paying more than an independent professional says the home is worth
• ❌ Requires significant additional cash
• ❌ You have immediate negative equity (you owe more than it appraised for)
• ❌ If you need to sell in 1-3 years, you may lose money

Best when: You're in a highly competitive market, you plan to hold the property long-term (7+ years), and you have the cash reserves. Also appropriate if you believe the appraisal genuinely missed value (strong comps the appraiser didn't use).

Decision framework — Should you cover the gap?

Ask yourself:

1. How long will you own this home? (If 7+ years, short-term overpayment matters less)
2. Do you have the cash without depleting your emergency fund?
3. Do you genuinely believe the home is worth the agreed price despite the appraisal?
4. Would you regret losing this home more than you'd regret paying the gap?

If you answered "yes" to all four, covering the gap may be the right call.

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Option 4: Request a Reconsideration of Value (ROV)

How it works: You (through your lender) formally ask the appraiser to reconsider their valuation by providing additional comparable sales or correcting factual errors. This isn't a new appraisal — it's asking the same appraiser to review additional data.

What you need:

• 2-3 comparable sales the appraiser may have missed (pending sales, very recent closings, or sales in the immediate neighborhood)
• Documentation of factual errors (wrong square footage, missing bedroom count, incorrect lot size)
• Evidence of upgrades or features the appraiser may not have adequately valued

Script for your lender:

"We'd like to request a Reconsideration of Value. We've identified the following additional comparable sales that we believe more accurately reflect the property's market value: [Comp 1 with address, sale price, date, and key similarities], [Comp 2], [Comp 3]. Additionally, we believe the following factual items may need correction: [specific errors]. We respectfully request the appraiser review these items and determine whether an adjustment is warranted."

Pros:

• ✅ No additional cost (the appraiser reviews at no charge)
• ✅ If successful, the problem disappears entirely
• ✅ Legitimate — appraisers sometimes miss relevant comps

Cons:

• ❌ Low success rate (roughly 15-25% result in a changed value, in my experience)
• ❌ Takes 3-7 business days, which may push your closing
• ❌ Appraiser is not obligated to change the value even with new data
• ❌ You cannot pressure or "shop" for a different result — that's a USPAP violation

Best when: You have legitimate additional comps the appraiser clearly missed, or there's an objective error in the report (wrong square footage, missing a bathroom, etc.).

Pro tip: Your real estate agent should be the one sourcing additional comps. They know the market better than anyone. Send your agent the appraisal report immediately — they may spot errors or missing comps right away.

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Option 5: Order a Second Appraisal

How it works: You request (through your lender) a completely new appraisal from a different appraiser. This is not the same as an ROV — it's a fresh evaluation.

Pros:

• ✅ A different appraiser may use different comps and reach a different conclusion
• ✅ Useful when you believe the first appraiser was genuinely unfamiliar with the area

Cons:

• ❌ Costs $400-$700+ (you pay for this)
• ❌ Not all lenders allow second appraisals
• ❌ No guarantee the second appraisal will be higher — it could be the same or lower
• ❌ If both appraisals are low, you've now paid twice for bad news
• ❌ Adds 1-2 weeks to your timeline

Best when: The first appraisal has clear methodological problems (used inappropriate comps, unfamiliar with the market, made significant errors), and your lender is willing to order a second.

Important: FHA loans have specific rules about second appraisals. In most cases, FHA will use the lower of two appraisals. Conventional loans vary by lender. Ask your loan officer before proceeding.

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Option 6: Change Your Loan Structure

How it works: Sometimes restructuring your financing can bridge the gap. Options include:

• Increase your down payment to offset the lower loan amount
• Switch loan products (e.g., from conventional to a [portfolio lender](/blog/portfolio-lender-guide) who may use different appraisal standards)
• Use a piggyback loan (primary mortgage + smaller [second mortgage](/blog/best-heloc-lenders-2026) or HELOC)

Pros:

• ✅ Can save the deal without renegotiating price
• ✅ Some restructuring options have minimal impact on your monthly payment

Cons:

• ❌ Requires additional cash or a more complex loan structure
• ❌ May result in higher interest rates
• ❌ Piggyback loans add complexity and a second monthly payment
• ❌ Your lender may not offer alternative structures

Best when: You have additional cash available and want to avoid renegotiating with the seller. Also works when the gap is small ($5,000-$10,000) and you can simply adjust your down payment.

Example:

• Original plan: 10% down on $500,000 = $50,000 down, $450,000 loan
• Appraisal: $480,000
• New structure: Put $52,000 down (still on the $500,000 price), loan is $448,000 (within 93.3% of appraised value — check if this meets your lender's LTV requirements)
• Or: Increase down payment to cover the gap + maintain LTV: $70,000 down, $430,000 loan

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Option 7: Walk Away

How it works: You exercise your appraisal contingency (if you have one) and terminate the contract. You get your [earnest money](/blog/earnest-money-explained) back and move on.

Pros:

• ✅ You don't overpay for a property
• ✅ Earnest money is protected (with appraisal contingency)
• ✅ You can find a better value elsewhere

Cons:

• ❌ You lose the home you wanted
• ❌ You've spent money on inspection, appraisal, and other due diligence costs (typically $1,000-$2,000 non-refundable)
• ❌ Back to square one in your search
• ❌ Emotionally difficult, especially after weeks of investment

Best when: The appraisal gap is large (10%+), the seller won't negotiate, you don't have cash to cover the gap, or you're not confident the property is worth the agreed price.

Critical warning: This option only works if your contract includes an appraisal contingency. If you waived the appraisal contingency (common in competitive markets), walking away means forfeiting your earnest money — potentially $5,000-$25,000+. This is why I strongly advise against waiving appraisal contingencies unless you have significant cash reserves and are prepared to cover a gap.

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Decision Framework: Which Option Is Right for You?

Use this flowchart to determine your best path:

Step 1: Check the Appraisal Report for Errors

• Are there factual mistakes (square footage, room count, lot size)? → Option 4 (ROV) first
• Did the appraiser miss obvious comparable sales? → Option 4 (ROV) first
• Is the report accurate but you disagree with the value? → Move to Step 2

Step 2: Assess the Gap Size

• Small gap (under $10K): Options 2, 3, or 6 are usually manageable
• Medium gap ($10K-$30K): Options 1 or 2 are your best bet
• Large gap ($30K+): Options 1 or 7 — this is a significant discrepancy that suggests the price may genuinely be too high

Step 3: Evaluate Your Leverage

• Seller has backup offers? Your leverage is low → Options 3 or 7
• Property has been on market 30+ days? Your leverage is high → Option 1
• Seller is motivated (relocation, divorce, financial)? → Options 1 or 2

Step 4: Check Your Cash Position

• Have cash to cover the gap? Options 2, 3, or 6 are viable
• Cash is tight? Options 1, 4, or 7

Timeline: How Long Does This Take?

Pro tip: Communicate with your lender and agent immediately when the appraisal comes in low. Every day counts when your closing date is looming.

What Sellers Should Know

If you're on the selling side of a low appraisal, here's honest advice:

1. Don't shoot the messenger. The appraiser isn't trying to kill your deal. They're providing an independent, regulated opinion of value.

2. Review the report yourself. Look for errors or missing comps. Your listing agent should do this immediately.

3. Consider the buyer's position. They can't finance more than the appraised value (in most cases). Refusing to budge may cost you the deal, and the next buyer's appraisal will likely come in at the same number.

4. Time costs money. If this deal falls through, you're back on market. That means more mortgage payments, more carrying costs, and the stigma of a "back on market" listing (buyers always wonder what went wrong).

5. The appraisal sets a precedent. If you re-list and get a new buyer, their appraisal may come in at the same value — or lower, since now your failed deal is part of the property history.

Prevention: Reducing Your Low-Appraisal Risk

For Buyers:

• Include an appraisal contingency in your offer (unless you have cash reserves and accept the risk)
• Research comps before you offer — if your offer is significantly above recent comps, prepare for a low appraisal
• Ask your agent to prepare a comp package for the appraiser (some appraisers accept this, some don't — but it doesn't hurt to try)

For Sellers:

• Price your home based on data, not emotion
• Prepare a property information packet for the appraiser: list of improvements, upgrade costs, and relevant comps
• Make the appraiser's job easy — have the home clean, accessible, and provide any information about recent neighborhood sales
• If you've made significant improvements, have documentation (receipts, permits, before/after photos)

The Bottom Line

A low appraisal isn't a dead deal — it's a negotiation point. In my experience, about 70-80% of transactions with low appraisals still close, usually through some combination of price adjustment, gap coverage, and creative problem-solving.

The key is speed, communication, and keeping emotion out of it. Both sides want the deal to work. The appraisal just changed the terms — it didn't change the fundamentals of why you wanted this home or why the seller wants to sell.

Stay calm, run the numbers, and choose the option that makes financial sense for your situation. That's the honest answer.

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Dealing with a low appraisal and not sure what to do? Talk to an HonestCasa advisor — we'll walk through your options for free.

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