What happens when your appraisal is lower than the offer

Key takeaways

• Low appraisals are common — and can derail deals.
• Buyers may cover the gap, renegotiate, challenge the appraisal, seek a second opinion or walk away if protected by a contingency.
• The appraisal directly affects your mortgage terms.

When you enter a purchase agreement on a home, your mortgage lender hires a licensed appraiser to assess its value. The independent appraisal assures the lender that the property is worth what you agreed to pay.

Sometimes, the appraised value comes in low. This “appraisal gap” — the difference between the appraised value and the contract price — can delay closing, jeopardize deposit money or derail the deal altogether.

In early 2026, about 8.6% of appraisals came in below the contract price, according to AmeriSave, a lender based in Sandy Spring, Georgia. Bidding wars, unique properties and incomplete or inaccurate property information are among the reasons a home’s value may fall short of expectations.

Buyers and sellers, working with their real estate agents, can take steps to overcome appraisal issues.

A licensed appraiser considers several factors when preparing an appraisal report, including:

• Property condition: The appraiser visits the home to document its condition, upgrades and features and takes measurements to verify square footage.
• Comparative market analysis (CMA): The appraiser compares the home with similar nearby properties, known as “comps,” to estimate its value.
• Market conditions: Neighborhood price trends, days on market and the supply or shortage of comparable homes also factor into the valuation.

Your lender receives a copy of the appraisal and shares it with you. The seller can request a copy from the lender. The appraisal fee is included in the buyer’s closing costs.

A low appraisal can put both sides in a difficult position. In a seller’s market, buyers may have to pay more than planned. In a buyer’s market, sellers may need to accept less. If the appraisal gap is large, the buyer may have no choice but to walk away from the deal.

Buyers typically have several paths forward:

• Pay the difference: If you have extra cash, you can increase your down payment so the loan amount aligns with the appraised value.
• Negotiate with the seller: With help from your agent, you can ask the seller to lower the purchase price.
• Challenge the appraisal: You and your agent can request a reconsideration of value by submitting better or more relevant comparable sales.
• Request a second appraisal: You may be able to order another appraisal at additional cost or switch lenders if you believe it could produce a different result.
• Walk away: If your purchase agreement includes an appraisal contingency, you may cancel the deal and recover some or all of your earnest money deposit, depending on contract terms. Without a contingency, you could lose your deposit and face potential legal action.

Sellers also have options when an appraisal falls short:

• Pay the difference: Cover the appraisal gap on behalf of the buyer.
• Split the gap: Propose sharing the cost of the appraisal gap with the buyer.
• Accept a lower price: While costly, reducing the price may prevent relisting and repeating the appraisal issue.
• Renegotiate contract terms: Use the situation to negotiate other concessions or changes to the agreement.
• Relist the property: If the buyer walks away, making improvements could boost the home’s value before returning it to the market.

Lenders evaluate loans using a loan-to-value ratio, or LTV, which compares the loan amount with the home’s appraised value. A higher loan-to-value ratio signals greater risk.

When an appraisal comes in below the offer price, the loan-to-value ratio increases. Some lenders may deny the loan. Others may approve it with conditions, such as:

• A higher down payment 
• A higher interest rate 
• Required private mortgage insurance, increasing monthly payments 

How lenders respond can depend on the loan type:

• Conventional loans: Appraisal contingencies are optional in some states, so adding one can offer protection. Sellers may contribute a portion of the contract price to offset the appraisal gap
• Government-backed loans: FHA and VA loans require appraisal contingencies, allowing buyers to walk away more easily. These loans often have stricter appraisal standards. Sellers cannot contribute directly to the down payment but may help with closing costs, up to a set percentage 

A low appraisal can benefit buyers if it leads to a lower purchase price. It may also result in lower property taxes. Sellers, however, generally gain little from a low appraisal.

This story was updated May 7.