Appraisal Gap 2025: What to Do When Your Home Appraises for Less Than Offer Price (6 Options to Save Your Deal)
You offered $400,000. The appraisal came back at $380,000. Now what? Here are 6 strategies to close the gap, save your deal, or walk away without losing your earnest money.
Quick Answer: What Is an Appraisal Gap?
An appraisal gap happens when the home appraises for less than your offer price. Lenders only finance based on the lower number—meaning you need extra cash or the deal falls apart.
- Example: You offer $400K, appraisal is $380K = $20K gap you must cover in cash.
- 6 options: Renegotiate price, bring cash, split difference, challenge appraisal, switch loan type, or walk away.
- Protection: Always include an appraisal contingency in your offer.
If you are stuck in an appraisal gap, shop lenders with flexible LTV ratios who may approve you with less cash down.
6 Options When Your Appraisal Comes In Low
You have leverage. The seller wants to close. You want the house. Here is how to negotiate your way out of an appraisal gap:
Option 1: Renegotiate the Purchase Price
Best for: Buyers with an appraisal contingency and a motivated seller.
Ask the seller to lower the price to match the appraisal. If the appraisal is $380K, offer to buy at $380K. The seller may agree if they need to close quickly or if the market is cooling.
Negotiation tip: Point out that the next buyer will face the same appraisal issue. The seller can either accept your offer now or start over with a new buyer who will get the same low appraisal.
Risk: The seller may refuse and move on to another buyer willing to cover the gap.
Option 2: Bring Extra Cash to Close the Gap
Best for: Buyers with extra savings who really want the house.
If the gap is $20K and you have the cash, you can cover it and move forward. Your down payment stays the same—you just add $20K on top to make up the difference.
Example: Offer $400K, appraisal $380K, 20% down = $76K down payment + $20K gap = $96K total cash needed.
Risk: You are paying more than the appraised value, which means you start with negative equity. If you need to sell soon, you may lose money.
Option 3: Split the Difference With the Seller
Best for: Buyers and sellers who both want to close but cannot fully cover the gap.
Negotiate a compromise. If the gap is $20K, you each cover $10K. The seller lowers the price by $10K, and you bring an extra $10K in cash.
Example: Offer $400K, appraisal $380K. New price: $390K. You bring $10K extra cash.
Negotiation tip: Frame it as a win-win. The seller avoids starting over, and you get the house without draining all your savings.
Option 4: Challenge the Appraisal
Best for: Buyers who believe the appraisal is inaccurate.
If you think the appraiser missed comparable sales or made errors, you can challenge it. Provide recent comps (similar homes sold nearby) that support a higher value.
How to challenge: Your agent or lender submits a Reconsideration of Value (ROV) with supporting data. The appraiser reviews and may adjust the value—or stand by the original number.
Success rate: Low. Appraisers rarely change their valuation unless there is a clear error.
Alternative: Order a second appraisal (costs $400-$600). Some lenders allow it, but you pay out of pocket.
Option 5: Switch to a Different Loan Type
Best for: Buyers using FHA/VA loans who can qualify for conventional.
FHA and VA appraisals are stricter and include property condition requirements. If the home fails FHA/VA appraisal, switching to a conventional loan may work—conventional appraisals are more lenient.
Trade-off: Conventional loans require higher credit scores (620+ vs 580 for FHA) and may require a larger down payment.
If you need help finding lenders with flexible loan options, compare lenders who offer multiple loan types.
Option 6: Walk Away (If You Have a Contingency)
Best for: Buyers who cannot or will not cover the gap.
If you included an appraisal contingency in your offer, you can walk away and get your earnest money back. No penalties. No loss (except the appraisal fee you already paid).
When to walk: If the gap is too large, the seller refuses to negotiate, or you realize you are overpaying.
Warning: If you waived the appraisal contingency (common in hot markets), you are legally obligated to close or you lose your earnest money (typically 1-3% of purchase price).
How to Avoid Appraisal Gaps (Prevention Strategies)
The best way to handle an appraisal gap is to avoid it in the first place. Here is how:
1. Include an Appraisal Contingency in Your Offer
This clause lets you walk away or renegotiate if the appraisal comes in low. In competitive markets, sellers may reject offers with contingencies—but it protects you from overpaying.
2. Do Not Overbid in Bidding Wars
Offering $50K over asking to win a bidding war feels great—until the appraisal comes back at asking price. Bid strategically, not emotionally.
3. Research Comparable Sales Before Making an Offer
Your agent should pull recent comps (similar homes sold in the area in the last 3-6 months). If your offer is way above comps, expect an appraisal gap.
4. Order a Pre-Listing Appraisal (Optional)
Some buyers order their own appraisal before making an offer to know the true value. Costs $400-$600, but prevents surprises. Note: The lender will still require their own appraisal, so you pay twice.
5. Negotiate an Appraisal Gap Coverage Clause
In your offer, specify that the seller will cover up to $X of any appraisal gap. Example: Seller agrees to cover up to $10K if appraisal comes in low. This shifts risk to the seller.
Stuck in an Appraisal Gap? Find Lenders With Flexible Options
Some lenders allow higher LTV ratios or alternative loan types that can help you close the gap. Get matched with lenders who specialize in tough appraisal situations.
Get Matched With Flexible Lenders →Frequently Asked Questions
Do Not Let an Appraisal Gap Kill Your Dream Home
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