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What Happens If Your Home Appraises for Less Than the Selling Price?

You're under contract, things are moving along—and then the appraisal comes back lower than the agreed-upon selling price. For both buyers and sellers, this can feel like a deal-breaker. But don’t panic! Here’s what it means and how sellers can respond when faced with a low appraisal.


🏦 First, Why Does the Appraisal Matter?

When a buyer is financing the purchase with a mortgage, the lender requires an appraisal to ensure the home is worth the loan amount. If the appraisal comes in lower than the contract price, the bank may not lend the full amount, creating a financing gap.


Example:

  • Sale price: $500,000

  • Appraised value: $475,000

  • Loan-to-value (LTV) is now based on $475,000, not $500,000


⚠️ Why Appraisals Come in Low

  • Rapidly rising markets

  • Multiple offers pushing price above market value

  • Lack of recent comparable sales

  • Appraiser unfamiliar with the local market

  • Unique or over-customized property


📉 What Are Your Options as the Seller?

A low appraisal isn’t the end of the deal—but it does require a game plan. Here are your options:


1. Lower the Price

To keep the deal moving, you may agree to match the appraised value. This can be a tough pill to swallow, but if time is of the essence or the market is softening, it might be worth it.


2. Ask the Buyer to Cover the Difference

The buyer can choose to bring extra cash to cover the gap between the appraised value and the purchase price. This often depends on their budget and how badly they want the home.


3. Split the Difference

A compromise: reduce the price partially while asking the buyer to bring some additional funds. This keeps the deal fair and moving forward.


4. Challenge the Appraisal

If you strongly believe the appraisal missed the mark:

  • Provide additional comparable sales

  • Point out recent improvements or features not included

  • Request a reconsideration through the buyer’s lender

    Note: This can take time and is not always successful.


5. Cancel the Deal

If neither party budges and there’s no appraisal contingency waiver, the contract could fall through. While disappointing, you may have other buyers ready if your home is in demand.


💡 Pro Tips to Avoid a Low Appraisal

  • Price your home based on recent comparable sales, not emotions or best-case scenarios

  • Highlight upgrades and improvements for the appraiser

  • Keep the home clean and well-presented for the appraisal visit


Final Thoughts

Low appraisals aren’t uncommon—especially in competitive markets. As a seller, how you respond can make or break the sale. Stay calm, communicate openly, and work with your agent to choose the best path forward.


Scott Sweeney

Your NorCal Realtor

M&M Real Estate

BRE Lic# 01938720

Cell: Call/Text 707-330-2324


About Scott Sweeney


SweeneySells

Full Time Realtor 13 Years +

Over 100 Families Served

Top 5% Producing Agent

Buying & Listing Specialist

Contract & Negotiation Ninja

CSUS Business & Marketing Graduate 2006


With quickly serving over a 100 families, Scott Sweeney has become a top 5% producing Realtor in the greater Sacramento area who has helped clients from the Bay Area to South Lake Tahoe. Scott has a Bachelor Of Science in Business Administration, with a concentration in Marketing from CSUS. His education, and extensive background in the hospitality, marketing, and real estate industries, have helped Scott to become one of the leading, and most sought after agents in the area.


Reach out to SweeneySells today, and take the first step towards your real estate goals!

📞707-330-2324




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