When the Appraisal Comes in Low

An appraisal is the lender's independent opinion of a home's value. If it comes in lower than your contract price, it does not automatically end the deal. You have options.

Why appraisals come in low

Appraisers rely on recent comparable sales. If the market is shifting, or there are few similar homes nearby, the appraisal can lag behind the price you agreed to.

How your contract handles it

In Texas, the addenda and choices in your contract decide what happens, for example the Third Party Financing Addendum or a separate appraisal addendum. Depending on what you agreed to, you may be able to terminate and get your earnest money back if the appraisal is low, or you may have agreed to cover some or all of a gap. This is decided when you write the offer, so it is worth talking through up front.

Your options

• Ask the seller to lower the price to the appraised value
• Meet in the middle, with each side covering part of the gap
• Bring extra cash to cover the difference
• Ask the lender about a reconsideration of value if there are better comps the appraiser missed
• Terminate, if your contract allows it

How I approach it

First I look at the appraisal and the comps used. If strong comps were missed, a reconsideration can be worth trying. Then we talk with the listing agent. Sellers often know that a new buyer's lender would likely see the same value.

A low appraisal is stressful, but it is usually a negotiation, not the end of the road. If it happens to you, call me before you decide anything.