The lender bases your loan on the appraised value, not your offer price. Here is how to respond when an appraisal falls short: renegotiate, add cash, dispute the report or leave the deal.
The appraisal is one of the last hurdles between you and the keys, and when it comes back below your offer price, the deal is not automatically dead. It does mean the lender will size your loan to the lower value, so someone has to cover the difference. Here are the options, from renegotiating the price to disputing the report.
Why does the appraised value matter to your lender?
Your lender orders an appraisal to confirm the house is worth roughly what it is being asked to finance. The appraiser is an independent, licensed professional who works under set rules, and no one involved in the loan is allowed to sway the value the appraiser reaches. You are entitled to a copy of the report from your lender, so ask for it if it has not shown up.
Appraisals are not free. They typically cost between $300 and $600, the lender orders them, and the buyer usually pays. The value rests on comparable sales of similar homes nearby, along with details such as square footage, bedroom and bathroom counts and the year the house was built.
What is the gap between appraised value and offer price?
It is the dollar difference between the two numbers. If you offered $400,000 and the appraisal came in at $380,000, the gap is $20,000. The lender sizes the loan against the appraised value, not the price you agreed to pay, which is why a low appraisal creates a shortfall someone has to fill.
Lenders look for a healthy loan-to-value ratio, the mortgage amount divided by the appraised value. A low appraisal pushes that ratio up unless the loan amount or your cash contribution changes.
How do you renegotiate with the seller?
This is usually the first move. The CFPB advises using the lower appraised value to argue for a price cut, since a professional valuation under your agreed price is powerful support for the claim that the price ran ahead of what similar homes nearby have sold for. Sellers are not caught off guard by this: in a 2024 Zillow survey, 23% of sellers said at least one of their offers fell through because the appraisal came in below the purchase price.
Can you pay the difference in cash?
Yes, if your contract allows it and you have the savings. When the seller will not lower the price, you can bring extra money to closing so the loan and your down payment together cover the full price. On the example above, that means finding $20,000 beyond what you had already planned to pay.
Before committing, check your cash cushion. Covering a gap competes with closing costs, moving expenses and early repairs, and the CFPB warns that buying above the appraised value is risky. Our guide to how much cash you need to close on a house walks through the full tally.
How do you dispute a low appraisal?
You can request a reconsideration of value, known as an ROV. Fannie Mae, Freddie Mac and HUD published borrower-initiated requirements that took effect May 1, 2024, and each appraisal report allows one borrower ROV request. Start by reading the report. It should rest on comparable sales, and you can check whether those comps really match your home in size, condition and location.
If you find errors or missed sales, submit an ROV request through your lender with the supporting evidence. A few rules worth knowing:
- You may request one ROV per appraisal report, so gather your best evidence first.
- You can cancel the request, and the lender should explain how.
- The appraiser must correct any errors in the report and comment on the changes, even when the value itself does not move.
No one is allowed to pressure the appraiser toward a number. Appraiser independence rules bar lenders and real estate agents from trying to shape the appraisal’s result.
When does your appraisal contingency apply?
Only if your written offer included one. An appraisal contingency is an addendum to the contract that lets you back out of the deal and recover your earnest money if the appraisal comes in low. With that clause in place and a seller who will not renegotiate, walking away is a real option.
Without a contingency, cancelling may still be possible, but the purchase contract controls and there can be costs. An attorney can read the contract and explain your options. The CFPB notes that those costs are likely small compared with buying a home that is not worth what you paid.
What happens to your loan terms when the appraisal comes in low?
Expect a revised Loan Estimate. A low appraisal counts as a change in circumstances, and the lender must show you how that change affects your loan terms and closing costs. Some fees can be increased lawfully in response, though it is illegal for a lender to intentionally underestimate charges and then surprise you with higher ones.
Read the revision and ask the lender why you received a new estimate, how the transaction now differs, and how it changes your loan amount, rate, monthly payment and cash to close. Our line-by-line guide to the Loan Estimate and Closing Disclosure helps you compare the documents.
How do you decide which path fits your budget?
Match the response to the size of the gap and your savings. A modest gap and a flexible seller point toward renegotiation. A gap you can absorb without draining reserves makes paying the difference workable. A report with clear errors calls for an ROV request. A large gap, an immovable seller and no contingency may make walking away the cheapest outcome.
This is easier when you know your numbers in advance. Our checklist for before you make an offer on a house covers the preparation that makes a low appraisal less likely to sink the deal.
Worth knowing
Before you sign a contract, ask whether it includes an appraisal contingency. Knowing your exit terms before a low appraisal arrives makes every option easier to weigh.
Related guides
- Getting Pre-Approved for a Mortgage, Step by Step: knowing your borrowing range before you offer helps you judge whether a gap is affordable.
- How Much Down Payment You Need, and When PMI Ends: how the size of your down payment shapes the loan and its insurance costs.
The short version
- Your lender sizes the mortgage to the appraised value, so a low appraisal creates a cash shortfall between that value and your offer price.
- Asking the seller to reduce the price is usually the first move, and the lower appraisal is strong evidence the price was above market value.
- You can bring extra cash to closing instead, but the CFPB warns that buying above the appraised value is risky.
- Each appraisal report allows one borrower-initiated reconsideration of value request under requirements from Fannie Mae, Freddie Mac and HUD that took effect May 1, 2024.
- A low appraisal counts as a change in circumstances, which means you should expect a revised Loan Estimate showing how your terms and costs changed.
Readers also ask
Do I get a copy of the appraisal?
Yes. The lender is required to send you a copy of the appraisal report, so ask for it if it has not arrived. It typically costs between $300 and $600, ordered by the lender and paid by the buyer.
Can I back out of the purchase if the appraisal is low?
Only if your contract includes an appraisal contingency, which lets you cancel and recover your earnest money. Without one, cancelling may still be possible but the contract controls, and an attorney can explain any costs.
How many times can I dispute an appraisal?
You may request one reconsideration of value per appraisal report, so gather your best evidence first. The appraiser must correct any errors and comment on the changes even if the value does not move.
Will my loan terms change after a low appraisal?
Yes, expect a revised Loan Estimate. A low appraisal is a change in circumstances, and the lender must show how it affects your loan amount, rate, monthly payment and cash to close.
This guide is general information about U.S. mortgages, not financial, tax or legal advice. Loan terms depend on the lender and on your credit, income and property, so confirm the details with your lender, and see consumerfinance.gov for official guidance.
