What Happens If the Home Appraises for Less Than My Offer?

Your lender will only lend based on the appraised value, so when the appraisal comes in below your offer, a gap opens that someone has to fill. For example, an offer of $400,000 with an appraisal of $390,000 leaves a $10,000 shortfall between the contract price and what the bank considers the home worth.

This matters most to financed buyers. Cash buyers can close at the contract price regardless, but for everyone using a loan, the appraisal gap is a real obstacle that must be resolved before closing.

You generally have four paths when an appraisal comes in low. The first is to renegotiate the price down to the appraised value, which requires the seller to agree. The second is to pay the difference in cash, bringing the gap out of your own funds. The third is to challenge the appraisal if it missed comparable sales or features. The fourth is to exercise your appraisal contingency and walk away.

Which path is right depends on how much you want the home, how much cash you have, and how reasonable the appraisal gap is. Your agent helps you weigh the options against the market.

When the appraisal is low, the seller faces the same problem you do: a financed buyer cannot close above the appraised value. That gives you leverage to request a price reduction to the appraised amount. Many sellers agree, especially if the alternative is starting over with a new buyer who may face the same appraisal.

Your agent presents the appraisal and makes the case: the appraised value reflects what the lender and the market support. A seller who wants the deal done will often meet you there.

If you love the home and the appraisal gap is modest, paying it in cash can close the deal. This is common in competitive markets where prices outpace appraisals. Just be sure the gap is a number you can comfortably absorb without wrecking your cash reserves.

If you believe the appraiser missed important comparable sales or undervalued the home, your agent can request a reconsideration of value with the lender. Provide the missing data and let the appraiser review it. This works more often than many buyers expect, but it is not guaranteed.