You found the perfect house. You made an offer. The seller accepted. You were already picking out paint colors. Then the appraisal report lands on your loan officer's desk and the number is $20,000 below your purchase price.
Your stomach drops. Your agent calls with that careful, measured tone that means bad news. "So... the appraisal came in a little low."
I've been through this scenario hundreds of times with my clients, and I want you to know something: a low appraisal is not a deal-killer. In fact, about 80% of deals with low appraisals still close. You just need the right strategy.
Let me walk you through exactly what's happening, why it matters, and the 7 strategies that actually work — including the exact scripts I give my clients for negotiating with sellers.
What a Low Appraisal Actually Means (And Why It Matters)
When an appraisal comes in below the purchase price, your lender will only base the loan on the appraised value — not what you agreed to pay. This creates an "appraisal gap" that needs to be covered somehow, or the deal falls apart.
Here's a concrete example to make this crystal clear:
Real Example: The $25,000 Gap
Instead of needing $37,500 for your down payment, you now need $60,000 — an extra $22,500 in cash. That's the real impact of a low appraisal.
Why Do Appraisals Come in Low?
Before we fix it, understanding why helps you choose the right strategy:
Bidding wars pushed the price above market value
40%In competitive markets, emotional bidding drives prices beyond what comparable sales support. The appraiser uses data, not emotions.
Limited or outdated comparable sales
25%In rural areas or unique neighborhoods, the appraiser may not have recent, similar sales to support the price. They use the best available comps, which may be months old or miles away.
The appraiser missed property improvements
15%A renovated kitchen, new roof, or finished basement may not be reflected if the appraiser didn't notice or didn't have documentation of the upgrades.
Market conditions shifted between offer and appraisal
10%If rates spiked or the market cooled between your offer date and the appraisal date, recent sales may reflect lower values.
Appraiser error or unfamiliarity with the area
10%Appraisers are human. They may use inappropriate comps, miss relevant sales, or not understand the local market dynamics. This is where a Reconsideration of Value can help.
7 Strategies to Bridge the Appraisal Gap
These are ranked from most common to most creative. In practice, most deals use a combination of strategies 1-3.
Renegotiate the Purchase Price
This is the most straightforward approach and works about 60% of the time. The logic is simple: an independent third party just said the home isn't worth what you agreed to pay. That's powerful leverage.
The script I give my clients: "We love the home and want to make this work. The appraisal came in at $[appraised value]. We'd like to adjust the purchase price to match the appraised value. This protects both of us — you get a guaranteed close, and we're not overpaying based on independent market data."
When it works best: Buyer's market, the seller has been on the market for 30+ days, or the seller is motivated (relocation, divorce, estate sale). When it doesn't: Hot seller's market with backup offers, or the gap is small enough that the seller knows you'll probably cover it.
Split the Difference
This is the most common resolution I see — both sides give a little. If the gap is $20,000, the seller drops the price by $10,000 and you bring an extra $10,000 in cash. Everyone compromises, everyone wins.
The script: "We understand the appraisal gap is $20,000. We're willing to bring an additional $10,000 in cash to closing if you'll reduce the price by $10,000. This way we both share the adjustment and we can close on schedule."
Pro tip: Start by asking for the full reduction (Strategy 1), then "compromise" to a split. This is basic negotiation — your first offer should never be your best offer.
Cover the Gap With Cash
If you have the funds and you believe the home is worth it (despite what the appraiser says), you can simply bring extra cash to closing to cover the gap. The lender doesn't care — they're protected because they're only lending based on the appraised value.
When this makes sense: The gap is small ($5,000-$10,000), you have the cash available, and you genuinely believe the home is worth the price based on your own research. Remember — appraisals are opinions, not facts. If three similar homes sold for $370K-$380K last month and the appraiser used older comps, the appraisal might be the one that's wrong.
When it doesn't: The gap is large (10%+), you'd be depleting your emergency fund, or you have doubts about the home's value. Paying $25,000 over appraised value means you start with negative equity — not ideal.
Need a Second Opinion on Your Mortgage?
Compare lenders who may offer different appraisal options or loan programs that work with low appraisals.
Compare Lender Options →Request a Reconsideration of Value (ROV)
If you believe the appraiser made errors or missed relevant comparable sales, you can formally challenge the appraisal. Your agent or lender submits a "Reconsideration of Value" request with supporting evidence.
What to include in an ROV:
- →Better comparable sales the appraiser missed (closer in proximity, more recent, more similar)
- →Documentation of improvements not reflected in the appraisal (permits, receipts, photos)
- →Errors in the appraisal report (wrong square footage, missing bedroom, incorrect lot size)
- →Active listings or pending sales that support a higher value
- →Market trend data showing appreciation since the comps used
Success rate: About 20-30% of ROVs result in an increased value. Even a partial increase helps — if the gap shrinks from $25K to $10K, that's much more manageable. The process takes 3-7 business days.
Request a Second Appraisal
Depending on your loan type, you may be able to get a second appraisal:
Restructure the Loan
Sometimes the solution isn't about the appraisal — it's about the loan structure. Options include:
- →Increase your down payment to cover the gap (if you have the funds)
- →Switch to a different loan program with different appraisal requirements
- →Add a co-borrower to increase qualifying income and afford a larger down payment
- →Use gift funds from family to cover the additional cash needed
Compare lenders with different appraisal policies — some are more flexible than others when it comes to low appraisals.
Walk Away (Use Your Appraisal Contingency)
If the gap is too large, the seller won't budge, and you don't have the cash — it's okay to walk away. If your contract includes an appraisal contingency (and it should), you can cancel the contract and get your earnest money back.
When to walk away: The gap is 10%+ of the purchase price, you'd be starting with significant negative equity, you'd deplete your savings to cover it, or the low appraisal is confirming your own doubts about the price. Sometimes the appraisal is protecting you from overpaying.
Important: If you waived your appraisal contingency (common in bidding wars), you may lose your earnest money if you walk away. This is why I always advise clients to think carefully before waiving this protection — or at minimum, include an appraisal gap clause with a cap.
What Is an Appraisal Gap Clause? (And Should You Use One?)
An appraisal gap clause is a provision in your purchase contract where you agree to cover the difference between the appraised value and the purchase price, up to a specified amount, in cash. It's a way to make your offer competitive in a bidding war while still protecting yourself with a cap.
Example: $15,000 Appraisal Gap Clause
The clause protects you by capping your exposure. If the gap exceeds your clause amount, you can renegotiate or walk away.
Real Story: How We Saved a $18,000 Gap Deal
My clients, a young couple in Denver, offered $425,000 on a home listed at $415,000 (competitive market, multiple offers). The appraisal came back at $407,000 — an $18,000 gap.
Here's what we did:
- 1. ROV filed: Their agent found 2 recent sales the appraiser missed. Value increased to $412,000 (gap reduced to $13K).
- 2. Seller negotiated: Seller agreed to drop price by $5,000 (to $420K). Gap now $8K.
- 3. Buyers covered: They brought $8,000 extra cash from savings.
- 4. Result: Closed at $420,000 with appraised value of $412,000. Extra cash needed: $8,000.
Total time to resolve: 9 days. The combination of ROV + negotiation + cash turned an $18K problem into an $8K solution.
How to Prevent Low Appraisals (For Your Next Offer)
Looking for a lender with appraisal waiver options? Get pre-approved and ask about appraisal waiver eligibility — borrowers with 20%+ down and 740+ credit scores often qualify.
Frequently Asked Questions
What happens when an appraisal comes in low?
The lender only lends based on the appraised value, creating a gap someone must cover. Options: renegotiate price, bring extra cash, split the difference, challenge the appraisal, or walk away.
What is an appraisal gap clause?
A contract provision where you agree to cover the difference between appraised value and purchase price, up to a specified cap, in cash. Makes your offer competitive while limiting risk.
Can I dispute a low appraisal?
Yes — through a Reconsideration of Value (ROV). Submit better comps, improvement documentation, or errors found in the report. Success rate: ~20-30%.
Can I get a second appraisal?
Conventional: usually yes. FHA: restricted (low value stays 120 days). VA: has a special Tidewater process. Ask your lender about options.
Should I walk away from a low appraisal?
Consider walking if: gap is 10%+, you'd deplete savings, seller won't negotiate, and the low value confirms your doubts. Use your appraisal contingency to protect your earnest money.
How often do appraisals come in low?
About 8-10% of appraisals come in below the contract price nationally. In hot markets with bidding wars, the rate can be 15-20%.
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