What to do When the Appraisal Comes in Lower Then the Sales Price


In today’s market it is not unusual to make an offer on a house and have the appraisal
come in lower than your offer. You may be wondering what you should do, and can you
even get financing for your home if the appraisal comes in lower than what you offered?

These are all common questions in today’s market. Before we talk about how you can
keep the deal and still get your home loan, let’s look at how a low appraisal happens in
the first place.

How Does A Low Appraisal Happen?

Home appraisals are just a part of the home buying and selling process. They help to
establish the value of the home. The lender requires a home appraisal because they
need to know that the home is worth what they are lending you for the home. An
appraisal assesses the actual value of the home and ensures that this value is equal to
the loan amount that you, the borrower, are asking for. Appraisals help buyers know if
they are paying too much for the home.

In a hot market, buyers may push up the value of a home, by offering more than asking
price. You may have had this happen on a house you were wanting. It can be very
frustrating indeed. But let’s say that you’ve found the house of your dreams and your
the offer was accepted. You’ve got an appraisal on the home and are surprised or
maybe not surprised to find out that the appraisal has come in lower than the sales
price. There are many factors that can affect a low appraisal including:

Rising market values

Artificially inflated prices

Declining market values

Overpricing by the seller

The property is not wellmaintained

Foreclosures or short sales in the neighborhood

The market has an impact on home values. The appraiser will have an understanding
of local influences that can have the largest impact on the property valuation. You need
to understand that the appraisal and valuation of the home is out of your hands due to
fluctuating market trends and outside influences.

Let’s look at what you can do when an appraisal does come in lower than the sales

What Can You Do When the Appraisal Comes in Low?

Most appraisals will come in at the asking price, but when they do come in low you have
some options.
Renegotiate Your Offer
The first thing you can do is to renegotiate your offer. Your offer includes an appraisal
contingency that allows you to renegotiate your offer if the appraisal comes in low. The
seller may have priced the home too high and realize with the appraisal that the value is
really lower and meet the value of the appraisal. If they do not lower the sales price to
meet the value of the appraisal you need to look at your next steps.

Dispute A Low Home Appraisal

You may consider having your lender dispute the appraisal by submitting a
Reconsideration of Value (ROV). You need to realize though that winning a dispute
isn’t easy. You will need hard evidence to back up your claims that the home is worth
more. This evidence will come from other homes that sold nearby. If you can find
recent comparable home sales that sold for a higher price, you might be able to
successfully contest your appraisal.

Your lender can help facilitate this process, by providing new comp sales that were not
used by the appraiser but that are believed to be superior to the comps the appraiser
relied on. If the appraiser agrees that these comps should be included, they will revise
the report and potentially revise the valuation. However, don’t expect a new appraisal if
you can’t find comparables that sold for the same price as the home you are trying to

Get A Second Appraisal

You may be able to convince your lender to get a second opinion on the appraisal,
however; it may not change the appraised value. All home valuations are reviewed for
accuracy and fairness by the rules set into place by the Home Valuation Code of

But, if you feel strongly that a second appraisal is worth the investment, you’ll need to
ask the lender for the second appraisal. You may have to split or cover the cost of
another appraisal. If it is found that the appraisal was indeed inaccurate, your lender
may offer to cover the cost.

Bring in Money to Make up the Difference

If the seller will not lower the sales price to meet the appraised value and you cannot
find comparable sales that support the higher price then you will need to make up the
difference between the sales price and the appraised value by bringing in more money
to the table, saving your deal.

What does that look like? Let’s say for example that the sales price for the home you