What Happens If the Appraisal Comes in Low? Your Options as a Texas Buyer

This is one of the most stressful moments in a transaction, but it is solvable. With the right strategy and an experienced agent by your side, most low appraisal situations end with the deal closing on terms that work for you.

What a Low Appraisal Means

Your lender only loans on the appraised value. If you agreed to buy a home for $320,000 and the appraisal comes in at $305,000, the lender will base your loan on $305,000. That leaves a $15,000 gap between the appraised value and your contract price, and someone has to close it or the price has to come down.

The key thing to understand is that the lender is not being difficult. They are following a rule: they will only lend you money based on what the home is actually worth, not what you agreed to pay. The appraiser's job is to give an independent, unbiased opinion of value. When the appraisal comes in low, it means the appraiser found enough comparable sales to conclude the home is not worth the contract price.

Your Five Options, Step by Step

Here are the five paths you can take when the appraisal comes in low. Each one is explained in detail below.

1. 1 Renegotiate the price down to (or toward) the appraised value with the seller.
2. 2 Pay the gap in cash at closing (cover the difference above appraised value yourself).
3. 3 Split the gap with the seller.
4. 4 Request a Reconsideration of Value (ROV) with comparable sales the appraiser may have missed.
5. 5 Walk away under the appraisal and financing contingency and recover your earnest money.

Option 1: Renegotiate the Price Down

Ask the seller to reduce the price to (or toward) the appraised value. This is the cleanest solution. The seller may agree because a new buyer would likely face the same appraisal issue. If you have an appraisal contingency, you can walk away and get your earnest money back, which gives you leverage in the negotiation.

Most sellers will seriously consider this option once they understand that the next buyer will face the same appraised value. The appraisal stays with the property for most loan types, so the seller cannot simply find another buyer and hope for a higher appraisal. This is your strongest negotiating position.

One thing to keep straight: the seller is not required to drop the price. They can say no. That is exactly why you have the other options below, and why your appraisal and financing contingency matters.

Option 2: Pay the Gap in Cash at Closing

Bring the extra cash to close, meaning you cover the difference above the appraised value yourself, on top of your existing down payment and closing costs. This only makes sense if you strongly believe the home is worth the purchase price and plan to stay long-term.

This option works best when you are buying a home that you intend to keep for many years and you have the cash reserves to cover the gap. It is also a strong signal to the seller that you are serious about the property. Just be careful not to drain your emergency fund in the process.

Option 3: Split the Gap With the Seller

Offer to split the gap with the seller, each of you covering part of the difference. This is a common compromise when both parties want the deal to close. It is fair, practical, and often the fastest way to get everyone back to the closing table.

Splitting the gap shows good faith on both sides. The seller gives up some of their expected proceeds, and you bring additional cash to bridge the remaining gap. In my experience, this is the most common solution that actually works.

Option 4: Request a Reconsideration of Value (ROV)

Your agent and lender can request a Reconsideration of Value, or ROV. That means submitting comparable sales evidence the appraiser may have missed and asking the appraiser to review it. It does not always work, but it can raise the value.

Be realistic about the odds. An ROV succeeds in roughly 15 to 20 percent of cases, and when it succeeds the typical increase is in the $10,000 to $25,000 range. Those are rough ranges, not a guarantee. Your agent and I will build the strongest comparable-sales packet we can, but the appraiser holds the pen.

For an ROV to stand a chance, you need genuinely overlooked data: a recent sale that closed after the appraisal was ordered, a comparable home with similar square footage and condition, or a pending sale that supports the higher value. The appraiser is not required to change their opinion, but they will review the new information.

Option 5: Walk Away and Recover Your Earnest Money

If you have an appraisal and financing contingency in your contract, you can terminate and get your earnest money back. In the standard Texas (TREC) contract, if you terminate properly you get your earnest money returned. Use this as leverage in negotiations. The seller knows you can walk, and that knowledge alone can motivate them to work with you on the price.

Never waive your appraisal contingency unless you fully understand the risk and have cash reserves to cover a potential gap. I have seen buyers lose their earnest money because they waived contingencies and could not come up with the cash when the appraisal came in low.

What the Texas Contract Means: TREC, Contingency, and the Option Period

Texas buyers negotiate with the standard contract published by the Texas Real Estate Commission (TREC). Two pieces of that contract shape your exit when an appraisal comes in low.

First, the financing and appraisal contingency. It gives you a way out if the home does not appraise for the contract price and the seller will not move on the number. Terminate properly under that contingency and your earnest money comes back. Second, the option period, the negotiated window where you can terminate for any reason and keep your earnest money, which is a useful backstop while the appraisal is in progress. The seller, on the other hand, is under no obligation to reduce the price.

Want the full picture on that walk-away window? Read What Is the Option Period in Texas?

How to Prevent Low Appraisals

Overpricing is the number one cause of low appraisals. Price the home correctly from the start. Provide comps to the appraiser. Choose an appraiser familiar with the area. And do not waive the appraisal contingency without understanding the risk.

As a buyer, you can also work with an agent and loan officer who understand the local market. Knowing which neighborhoods are appreciating, which homes are priced correctly, and where the appraisals typically come in can make a huge difference. I always advise my buyers to budget for the possibility of an appraisal gap, especially in competitive markets where homes sell above asking price.