You're under contract at $350,000. The appraisal comes back at $335,000. Cue the panic call. Take a breath — a low appraisal is a negotiation event, not a disaster, and it has a well-worn playbook. In many cases it even works in your favor.
Why It Matters: The Lender Uses the LOWER Number
The lender bases your loan on the lower of the price or the appraised value. At 90% financing on our example: the loan is 90% of $335,000, not $350,000 — leaving a $15,000 "appraisal gap" that has to come from somewhere. Your five options:
Option 1: Renegotiate the Price (Try This First)
The appraisal is leverage. The seller now has written evidence their house is worth $335,000 — and every future FHA appraisal on that house may face the same number (FHA appraisals stick to the property for 4–6 months, VA appraisals attach similarly). Many sellers, facing re-listing and hitting the same wall, agree to drop to the appraised value or meet in the middle. You just saved $15,000 because of the appraisal.
Option 2: Split the Difference
The most common real-world outcome: seller comes down some, buyer brings some extra cash. A $7,500/$7,500 split closes the gap and the deal.
Option 3: Challenge the Appraisal
A reconsideration of value works when there's real ammunition: comparable sales the appraiser missed, factual errors (wrong square footage, missed renovations), or a genuinely hot micro-market. Your realtor supplies better comps; we submit the rebuttal. Honest expectation-setting: reconsiderations succeed only sometimes — but when the appraiser genuinely missed something, they work.
Option 4: Bring the Difference in Cash
If you love the house and believe in the area, you can cover the gap and proceed at the original price. Worth doing thoughtfully — you're paying above the appraised value, betting on the market to catch up. Sometimes right (unique house, rising area), sometimes emotion doing the math.
Option 5: Walk Away
If your contract has an appraisal contingency (this is why we insist on one), you can exit with your earnest money. No house is worth overpaying into regret — and inventory keeps coming.
The Broker's Role in All This
When the appraisal lands low, timing matters: contingency deadlines, lock expirations, and rebuttal windows all run concurrently. We quarterback the lender side — the reconsideration, the loan restructure if the number holds, and honest advice about whether the house is worth stretching for. In English, Portuguese, or Spanish.
Frequently Asked Questions
Who pays the appraisal gap?
It is negotiable: the seller drops the price, you bring extra cash, you split it — or, with an appraisal contingency, you walk away with your earnest money.
Can a low appraisal be challenged?
Yes — a reconsideration of value with better comparable sales or factual corrections. It succeeds only sometimes, but when the appraiser genuinely missed something, it works.
Should I waive the appraisal contingency to win a bidding war?
It is risky — without it, a low appraisal forces you to bring the gap in cash or lose your earnest money. If you waive it, know your maximum gap first.
Prepared by the Alvorada Mortgage, LLC team — a mortgage broker licensed in Georgia (#2137907) and Florida (#MBR5158). NMLS #2137907. Educational content; not a commitment to lend.