A low appraisal can stall or kill a home sale, but you have options: provide comparable sales evidence to challenge the appraisal, renegotiate the price with the buyer, or have the buyer pay the gap in cash. As a dual-licensed loan officer and realtor, I understand how appraisals work from both the lending and real estate sides.
Your Options When the Appraisal Comes in Low
When the appraisal comes in below the contract price, you have several options. First, review the appraisal report carefully for errors or omitted comparable sales. Appraisers sometimes miss recent sales or use outdated comps. Your real estate agent can provide a list of relevant comparable sales that the appraiser may have overlooked.
You can request a reconsideration of value (ROV) from the lender. The ROV process lets you submit additional comparable sales and evidence that supports a higher value. The appraiser reviews the evidence and either adjusts the value or stands by their original opinion. An ROV is free and often successful when good comps are presented clearly.
Comparable Sales Evidence
The best way to challenge a low appraisal is with recent, relevant comparable sales. Focus on sales that closed within the last 3 months in the same neighborhood or immediate area. Adjustments for square footage, condition, upgrades, and lot size should be clearly documented. If your home has upgrades that the appraiser did not account for, provide receipts and photos.
As a dual-licensed professional, I can help you prepare a strong comp package that the appraiser will take seriously. I understand how lenders and appraisers evaluate properties, and I know what evidence carries weight in the ROV process.
Negotiation and Buyer Gap Payment
If the appraisal sticks, the buyer and seller must negotiate who covers the gap. The buyer can pay the difference in cash if they have the funds and believe the home is worth the contract price. Alternatively, you can reduce the sale price to match the appraisal, or split the difference. Some contracts include an appraisal contingency that allows the buyer to walk away if the property does not appraise at the contract price.
In a competitive market, buyers sometimes waive the appraisal contingency or agree to cover a gap up to a certain amount. If your buyer has strong financing and a good agent, a low appraisal can often be resolved with a short negotiation. If the gap cannot be bridged, you may need to relist the property or find a new buyer with stronger financing.
