Getting a home appraised is one of the final steps before sealing the deal in a real estate transaction. That single number carries weight. It can either move things forward or bring everything to a halt. When the appraised value falls short of the agreed price, it puts pressure on both sides, especially if a mortgage lender is involved. So, how often do houses appraise low, and what happens next if they do? While it might feel like a dealbreaker at first, there are practical ways to turn the situation around.
How Often Do Appraisals Come in Low?
Many buyers worry about getting a low appraisal. Fortunately, it doesn’t happen as often as people think. According to Fannie Mae, less than 10 percent of appraisals come in below the agreed purchase price. Another study from Zillow found that 23 percent of sellers had an offer fall through due to a low appraisal, while 52 percent of buyers made their offer contingent on the home appraising for a certain amount.
In most cases, the appraisal matches the contract price. Still, knowing how often houses appraise low and how to handle it can help you feel more prepared.
Why Would an Appraisal Come in Low?
Many factors can lead to a lower-than-expected appraisal. Even in a hot housing market, a bidding war may push the price beyond what the home is actually worth. Here are some common reasons this happens:
Inaccurate Comparable Sales
Appraisers rely on recent sales of similar homes in the area to determine value. If those sales are outdated or not truly comparable, the valuation might fall short.
Overlooked Upgrades
If you recently renovated but didn’t provide receipts or details, the appraiser might miss key improvements that add value.
Market Conditions
In fast-rising markets, comparable home prices may lag behind the true current value. In slower markets, sellers may overprice their homes without realizing the market has shifted.
Inexperienced Appraiser
An appraiser unfamiliar with the neighborhood might miss unique features or fail to understand local trends. This often results in a conservative estimate.
Poor Property Condition
Homes in poor condition or in need of major repairs often receive lower appraisals. Even small issues like visible clutter can affect how the appraiser views the home.
Financing Structure
Sometimes, the contract price includes seller credits or concessions, which can increase the sale price above the appraised value.
These reasons explain why an appraisal would come in low, even when the buyer and seller feel confident about the sale price.
What To Do If Your Appraisal Comes In Low
So, how do you handle a low appraisal? It really comes down to your role in the deal and how flexible you’re willing to be. Whether you’re buying or selling, you’ve got choices, and with the right approach, the deal doesn’t have to fall apart.
For Buyers
Buyers have a few ways to handle a low appraisal without walking away from the deal:
- Ask your lender for a second appraisal if you suspect errors or outdated comps.
- Make up the difference in cash if you have extra funds available.
- Adjust your down payment. For example, you might reduce it and use that cash to cover the shortfall.
- Renegotiate the sale price with the seller, especially in a buyer’s market.
- Walk away using your appraisal contingency, if one was included in your offer.
Keep in mind that mortgage lenders use the appraisal to determine your loan limit. If the appraisal is lower, they won’t lend the full purchase price. You’ll need to bridge the gap one way or another.
For Sellers
If you’re a seller and the appraisal comes in low, don’t panic. You have a few options, too:
- Request a copy of the appraisal and check for errors.
- Encourage the buyer to dispute the value or request a second opinion.
- Lower your asking price to match the appraisal if you’re eager to close the deal.
- Offer to finance the difference if you can afford to do so.
- Cancel and relist your home, especially if you’re confident the appraisal was off.
In some cases, you may receive a better appraisal next time or attract a cash buyer who doesn’t need financing.
Can You Avoid a Low Appraisal?
Although no one can fully control the appraisal outcome, there are steps sellers can take to improve their chances. Clean the home thoroughly, keep it well-maintained, and provide receipts for all renovations. Share a list of recent improvements and comparable sales with the appraiser to give them a clearer picture.
If you’re buying a home, adding an appraisal contingency can protect you if the numbers don’t work out. It gives you the option to back out if the lender won’t approve the full amount. Some buyers skip this step in competitive markets to gain an edge, but that means taking on the risk of covering any shortfall yourself.
Turn a Low Appraisal Into a Strategic Advantage
A low appraisal isn’t just a hurdle; it can also be a turning point that strengthens your position. Buyers gain a chance to renegotiate or walk away from a bad deal. Sellers receive valuable market feedback that can guide future decisions. Instead of seeing it as a setback, treat it as a reality check and a chance to pivot. Whether you’re making your first offer or preparing to list, being informed puts you ahead of the curve. With the right mindset and a solid game plan, even an unexpected appraisal result can push you toward a better outcome.