What to Do if Your Home Appraisal Comes in Low

Lauren Wellbank
Written by Lauren Wellbank
Updated June 13, 2022
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Photo: Fuse / Corbis / Getty Images


  • A low appraisal value doesn’t mean the end of your home buying or selling dreams—you still have options.

  • Some home improvements can offer significant returns on investment to raise your property value.

  • You can solicit a second professional opinion if you believe the original appraisal is inaccurate.

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Lower-than-expected home appraisals can seem like a nightmare for homeowners and buyers alike. Fortunately, getting your appraisal back with a less-than-hoped-for figure doesn’t mean your dreams of buying, selling, or refinancing has to go on the back burner. Let’s take a look at how to handle a low home appraisal.

What Does a Low Home Appraisal Mean?

First, let’s review how a home appraiser determines the property’s value. A local real estate appraiser will work as an objective third party and review your property before drawing up their report, which will contain all the relevant details of your property and its appraised value. 

A low appraisal happens when the appraiser assigns the property a value that’s lower than the agreed-upon offer price. Since loan lenders will not provide a mortgage above the home’s appraised value, a low appraisal limits the amount buyers can finance from the lender. 

Why Did My Home Appraisal Come in Low?

A low appraisal can occur for several reasons, and it’s most common during a competitive real estate market. Appraisers can only compare the home in question to closed sales in the area, and homes with the same location and number of bedrooms and bathrooms. If the appraiser didn’t consider data on the most recently sold comparable homes, it could result in a low appraisal.

Another reason is that the appraiser may have neglected to include all of the home’s home improvement information. That’s why it’s important for sellers to provide home appraisers with a list of home upgrades and the dates completed.

How to Handle a Low Home Appraisal as a Buyer

Although a lower-than-expected appraisal doesn’t spell disaster for home buyers, it throws a serious wrench in the planning process. Check out these strategies for handling a low home appraisal as a potential buyer.

Negotiate With the Seller

If the appraised value of your potential new home is lower than anticipated, you have the opportunity to negotiate with the seller for a lower purchase price. Talk with the seller about what they can do to match the appraised value of their home in order for the sale to continue.

Before taking this route, consult your real estate agent about handling the negotiations. Keep in mind that the seller likely doesn’t want to lose your potential sale, so use the low appraisal as leverage to lower the purchase price.

Request a Second Appraisal

While not all loan lenders will allow a second appraisal, it never hurts to ask. Check with your lender and see if another appraiser could evaluate the property to ensure the first opinion was accurate. If they come to the same conclusion in the second appraisal report, it’s fair to assume that the value is accurate, even if it’s disappointing. However, if they appraise the home higher, you may be able to regain some of the ground lost with that first appraisal. 

Utilize the Appraisal Contingency

If you kept the appraisal contingency in your purchase agreement, you have the option to back out of the sale without losing your earnest money deposit. This type of contingency protects the buyer during low appraisal situations so you can walk away from the sale without losing money. However, some home buyers may still want to buy the home despite the low appraised value, but it’s helpful to have the option if needed.

Close the Appraisal Gap

The cost difference between the home’s current purchase price and the appraised value is known as the appraisal gap. One option is for home buyers to close the appraisal gap by bringing cash to the closing table to make up the price difference. This is a risky move for buyers since it means overpaying the estimated fair market value of the home. This scenario is not typically ideal for buyers because they’ll have to pay out-of-pocket in addition to the mortgage. Still, highly motivated buyers may be willing to pursue this option.

How to Handle a Low Appraisal as a Seller

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A low home appraisal may seem like a blow to a home seller, but there are a few ways to increase your home’s value or avoid a low appraisal altogether. Check out these tips for potential strategies.

Make the Necessary Home Improvements

If you’re hoping to raise your home value for a sale or refinance, consider making some improvements that will provide a major return on your investment (ROI). Some high ROI improvements include:

In addition to making high-ROI improvements, read through the appraisal report to determine which cited areas of your home need work. Then, use that as a checklist of tasks to complete before your next appraisal.

Lower Your Home’s Asking Price

If the appraisal came in lower than your asking price, things could get sticky for the buyer and the seller. Depending on how much the homeowner needs to clear in order to pay off their existing mortgage, they may negotiate to lower the sale price to meet the updated home value. If that’s the case, you’ll have to weigh the risks and rewards of lowering your home’s purchase price to complete the sale.

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