Answers · Buying a home
What happens when the appraisal comes in low?
The lender bases the loan on the lower of the price and the appraised value, so a low appraisal opens a gap between what you agreed to pay and what the lender will finance. The gap gets closed one of four ways: the seller lowers the price, you bring more cash, you split the difference, or you challenge the appraisal with real evidence. Sometimes a combination.
Written by Andrew Malm, Senior Loan Originator, NMLS# 2663426. Last reviewed .
First, understand what the appraisal is and is not. It is one licensed appraiser's opinion of value, built from recent comparable sales and the condition of the home. It is not an insult to the house or to you. In a rising market, appraisals lag because the comparable sales are a few months old.
Second, read the report. Appraisers make mistakes: wrong square footage, a finished basement counted as unfinished, a comparable sale from the wrong neighborhood. A reconsideration of value, with specific corrections and better comparables, can work. A complaint that the number feels low does not.
Third, negotiate. The seller now knows that the next buyer's appraiser will probably land in the same place. That is leverage. Many sellers meet the appraised value or come close.
Fourth, decide what the house is worth to you. Paying over appraised value is a real choice people make for the right home. It should be a choice, not a surprise.
What I'd do
- Ask your agent to send the appraiser the best comparable sales before the visit, not after.
- If the value comes in low, get the full report and read it the same day.
- Know your number before negotiations start: the most cash you would add to keep the house.
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