4 Options if Your Home Appraisal Comes in Low
Low appraisals are pretty common these days. With home prices on the rise and bidding wars the norm, many times, buyers offer much more than a home is actually worth just to win out.
While this ultimately helps them win the home, it also causes problems come appraisal time — often expensive ones, too.
What can you do if your home’s appraisal comes in lower than what you offered? What options do you have, and can you still buy the home? Let’s break it down.
When your home appraisal comes in low: 4 possible options
1. You can make up the difference in cash.
The easiest option is to just pay the difference — the gap between your offer and the home’s appraised value — out of pocket. Obviously, this is a lot easier if it’s a small discrepancy or you have a lot stowed away in savings.
If you’re tighter on cash, you can talk to your loan officer about changing your financing. For example, if you were planning on putting 20% down on a conventional loan, maybe you could switch to an FHA loan and put only 3.5% down instead. That would free up some cash that you can then use on your appraisal gap.
2. You can renegotiate with the seller.
You can also go back to the seller and renegotiate your deal. This might mean asking them to reduce the sale price — ideally down to the appraised value so you don’t have to pay any extra cash. Or, you could ask if they’ll split the difference or accept a slightly reduced price.
Keep in mind that this won’t always be successful. If you were up against dozens of other buyers, the seller probably won’t reduce their price much — if at all. (They may even have backup bids on the table already).
3. You can refute the appraisal (or get another one).
You can always refute the appraisal and try to prove the home’s worth more than your appraiser said. This requires pulling comparable sales data — namely, the recent sale prices of similar homes in the area. If those numbers support a higher value, there’s a chance your appraiser could update their report.
You can also order another appraisal. This will cost money, though. Most appraisals cost anywhere from $300 to $500, depending on the size of the home.
4. You can back out of the deal.
Finally, if none of the above strategies works, you can consider backing out of the transaction entirely. Remember, though: This is only possible if you have an appraisal contingency in your sale contract. If you don’t have one of these clauses in your offer, backing out will mean forfeiting all earnest money and other deposits you might have made.
Ask for help if your home appraisal comes in low
If your appraisal comes in low, always consult your real estate agent and loan officer for guidance. They can help you determine the best (and most affordable) path forward for your home purchase.