FAQ: What happens if the home appraisal comes in low?

An appraisal is an important part of the homebuying process because it provides an independent opinion of a property’s market value. Lenders use the appraisal to help determine whether the home’s value supports the amount they’re being asked to finance. But what happens if the appraisal comes in below the agreed-upon purchase price?

A low appraisal doesn’t automatically mean the deal is over. It simply means there’s a difference between the purchase price and the appraised value that may need to be addressed. Depending on the situation, the buyer and seller may be able to renegotiate the purchase price, or the buyer may choose to bring additional cash to closing to make up some or all of the difference.

There may also be other options depending on the loan, the appraisal, and the terms of the purchase contract. In some cases, the appraisal may warrant further review or additional information about the property or comparable sales. Your mortgage and real estate professionals can help you understand what options may be available.

It’s important to remember that an appraisal is an assessment of value, not a statement that the purchase price was necessarily too high. Market conditions, recent comparable sales, property features, and other factors all contribute to the appraised value.

The bottom line: A low appraisal can create an additional hurdle, but it doesn’t necessarily mean you have to walk away from the home. Understanding your options and working with your mortgage and real estate professionals can help you determine the best path forward.