What to do if a home appraisal is low

Key Takeaways

• A low appraisal can delay or derail the sale of a home because lenders will not finance more than the appraised value.
• Buyers and sellers have options: renegotiate, dispute the appraisal, contribute cash or walk away.
• Preparing with inspections, repairs and an experienced real estate agent can help reduce appraisal problems.

What does a low rating mean?

A low appraisal occurs when the appraiser values ​​the home for less than the purchase price. Because lenders does not approve loans above appraised value, it creates a financing gap that could jeopardize the deal.

For example, if you offered $400,000, but the home appraisal comes in at $380,000, your lender will only approve a loan based on $380,000. The $20,000 difference must be resolved between the buyer and the seller.

Why valuations are low

“It is not unusual for an appraiser to overlook one or more important parts of the value equation when valuing a home,” says Mark Bruno, real estate agent and team leader at The home of the Monterey Peninsula. “One of the first things to look at is whether the comparable properties used in the appraisal are truly comparable to the subject property. Are they located in the same city and neighborhood? Have appropriate adjustments been made for views, privacy, lot size, condition, location, and other features that could weigh heavily on the value here? I have personally seen appraisals use similar properties in different but adjacent cities in a way that reduced the value of the subject property by more than $1 million. On the Monterey Peninsula, there are minor changes in location, view, privacy or neighborhood can create very large value differences.”

Several factors can lead to a low rating:

• Rising markets: Home prices may be rising faster than comparable sales data reflects.
• Unique features: Homes without many recent reviews can be harder to assess accurately.
• Condition issues: Outdated systems, deferred maintenance or visible defects can reduce the value.
• Market cooling: In slower markets, appraisals may fall below recent contract prices.

What buyers can do if the appraisal is low

1. Renegotiate the purchase price

Buyers can ask the seller to lower the price to match the appraised value. In many cases, sellers agree rather than risk losing the sale. This is often the cleanest solution if the seller is motivated, the appraisal seems fair, or the market has cooled since the offer was accepted. The buyer’s agent can use the appraisal report and recent comparable sales to substantiate the application.

2. Cover the difference in cash

If buyers want to move forward at the agreed price, they can pay the gap out of their own pocket. This often happens in competitive markets. This may work for buyers with extra savings, but it increases the amount of cash required at closing and may impact contingency reserves. Buyers should confirm with their lender how the additional money will affect loan approval.

3. Challenge the assessment

If the buyer or broker believes the appraisal is incorrect, he or she can request an appraisal reconsideration of value by submitting more comparable sales or correcting errors in the report.

“If a home appraisal comes up low, the first step is to carefully review the appraisal report for errors, missing upgrades, or comparable sales that may not accurately reflect the value of the property,” says Michael Marchena of Marchena home team recommends. “From there, your agent and lender can help determine the best path forward, whether that means requesting a reconsideration of value, renegotiating the purchase price, adjusting loan terms or deciding whether the buyer can close the appraisal gap. The key is not to panic: a low appraisal doesn’t always kill the deal, but it should be handled strategically and quickly.”

4. Change lender or appraiser

Because different lenders may use different appraisal management companies, ordering a new appraisal may result in a higher valuation.

5. Walk away

If the gap cannot be bridged, buyers can use a assessment of unforeseen circumstances cancel the contract without penalty.

What sellers can do if the appraisal is low

1. Lower the price

Agreeing on the appraised value can be the quickest way to keep the deal moving. This may work for buyers with extra savings, but it increases the amount of cash required at closing and may impact contingency reserves. Buyers should confirm with their lender how the additional money will affect loan approval.

2. Negotiate with the buyer

Sellers can agree to split the difference or cover some of the assessment gap.

“A low appraisal doesn’t necessarily mean the deal is dead. The first step is to carefully review the appraisal for inaccuracies and gather relevant comparable sales that may not have been considered,” says Andrew Lewis, broker, listing specialist and team leader at Performance real estate. “From there, buyers and sellers can explore solutions such as contesting the appraisal, adjusting the sales price, or negotiating how the gap will be closed. The most successful results occur when both parties focus on solving the problem rather than reacting emotionally to the number.”

3. Request a second appraisal

If the initial appraisal appears flawed, sellers can support the buyer in requesting a new one.

4. Improve the property

Small updates, repairs or cosmetic adjustments can sometimes help increase the appraised value upon reevaluation.

5. Relist the house

If the seller believes the appraisal is unreasonably low and no compromise is possible, he may choose to walk away and relist.

How do you avoid a low rating?

Although you cannot control every factor, preparation helps reduce risks:

• Work with an experienced real estate agent who knows local compositions.
• Provide a list of recent improvements to the appraiser.
• Cleaning and maintaining the property before the appraisal.
• Consider the pricing strategy in rapidly changing markets.
• Preparing for the home appraisal to ensure the best possible valuation.

Frequently asked questions about low valuations

How often do appraisals come in low?

Industry estimates say less than 10% of appraisals come in below contract, but the risk increases in hot or volatile markets.

Can you dispute a low rating?

Yes. Buyers or sellers can request a reconsideration of value by submitting stronger comparable sales or by pointing out errors in the report.

Should sellers lower the price after a low appraisal?

No. Sellers are not required to lower the price, but they may have to negotiate if they want to keep the deal alive.

What happens if I can’t close the rating gap?

If neither party can reconcile the difference, the deal may fail unless the contract contains a resolution.

Do cash buyers need an appraisal?

No. Cash buyers don’t need an appraisal from lenders, but some order one anyway for peace of mind.

Moving forward: when your rating was low

A low appraisal can be a challenge, but it’s important to remember that this is a common obstacle in real estate, and not necessarily a deal-breaker. Proactive planning, clear communication and informed decision-making are key to successfully navigating this situation. When your home’s appraisal is low, you can connect to a Redfin agent because their personal support and expert guidance can make the difference in achieving your goal buy houses or to sell goals.