Why appraisals come in low
Appraisers estimate value using recent comparable sales, property condition, size, location and market conditions. A gap can appear when comparable sales lag a fast-moving market, when the property has unusual features with few comparables, or when condition issues reduce value relative to similar homes.
Options when there is a gap
Which of these is available depends on the contract and the loan program:
- Renegotiate the purchase price with the seller.
- Buyer covers the difference in cash, if the buyer has the funds and chooses to.
- Split the difference between the parties.
- Ask the lender about a reconsideration of value if there is factual support, such as omitted comparable sales.
- Terminate in accordance with the contract's terms and deadlines.
Reducing the surprise
Reviewing recent comparable sales before writing an offer helps set expectations. Buyers who plan to compete above list price should discuss in advance, with their lender and agent, how they would handle a gap and what the contract will say about it.
Frequently asked questions
- Can the seller be forced to lower the price?
- No. Price changes after an appraisal are voluntary and must be agreed to in writing by both parties.
- Does a low appraisal mean I am overpaying?
- Not necessarily. An appraisal is one professional's opinion based on available comparable data. It is important because it governs the loan, but it is not the only measure of value.
- Can I use my own appraisal?
- The lender orders the appraisal it will rely on. A separate appraisal you commission does not replace it, though supporting data can sometimes accompany a reconsideration request.
Sources & references
Important notice
This guide is general educational information. It is not financial, tax or lending advice, and it is not a loan commitment or an offer of credit. Program availability, requirements, rates and costs vary by lender, program and borrower, and change over time. Confirm details with a licensed lender or tax professional.