What Happens If the Appraisal Comes in Low?

The buyer's lender will only lend based on the appraised value, so a low appraisal leaves a gap between that value and your price. You and the buyer then work it out: lower the price, have the buyer cover the gap, meet in the middle, or ask the lender to take a second look, and if the contract allows it, the buyer may be able to cancel.

I am Delia Bayna, a REALTOR with eXp Realty in Salt Lake City, Utah. A low appraisal feels like bad news, and sometimes it is. It is also a problem with a few clear ways through, and here is how I walk sellers through them.

When a buyer uses a loan, the lender hires an appraiser to give an opinion of what the home is worth. The appraisal protects the lender. They do not want to lend more than the house could sell for if something went wrong.

The appraiser visits the home, notes its condition and features, and compares it to recent sales of similar homes nearby. The appraiser also measures the house. I never measure a home myself. The appraiser settles the square footage, and that number can be different from county records or from an old listing.

An appraisal is one person's opinion, made for the lender, on one day. It does not erase what your home means to you, and it does not mean a buyer was wrong to want it. It is a number the loan has to work with.

Utah does not make sale prices public. Appraisers here rely on sales recorded in the MLS, the shared database agents use. When few homes like yours have sold nearby, the appraiser has less to work with and may reach farther away or further back in time.

Many Salt Lake City neighborhoods mix homes built in very different decades, side by side. A remodeled older home can be hard to match with a close sale. Many Utah homes also have finished basements. Appraisers usually count basement space separately from the floors above ground, so it often adds less value per square foot than the rooms upstairs. Sellers who count the basement in their total square footage can be surprised by that.

None of this is anyone's fault. It is why a price set from recent nearby sales, the way I describe in how I decide what to list a home for, holds up better at appraisal than a price set on hope.

When the appraisal comes in under the price, these are the usual paths:

• Lower the price to the appraised value. The loan works again, and the deal can keep moving.
• The buyer covers the gap. The buyer pays the difference in cash, on top of their down payment. Some buyers agreed to this in their offer. Others may choose to if they really want the house.
• Meet in the middle. You lower the price part of the way, and the buyer covers the rest.
• Ask the lender to take a second look. If the appraiser missed a good sale or got a fact wrong, the buyer's agent can send better information through the lender and ask for a review. It can work when there is a real mistake. It is not a do-over.
• The buyer cancels. Your REPC says whether the buyer's offer depends on the appraisal. If it does, the buyer may be able to cancel by the Financing & Appraisal Deadline written in the contract. If that happens, you can relist or turn to a backup offer.

This is one reason I look closely at the appraisal terms when offers come in. I walk through that in how to compare two offers on your house.

First, read the appraisal, or the key pages, if the buyer will share it. Look for plain mistakes: a missed bedroom or bathroom, the wrong square footage, or sales from a part of town that does not match yours. A real mistake is worth raising.

Second, look at your numbers. Ask your agent to show what you would net at the appraised value, at the middle, and at your contract price. When you see those three numbers, the choice is usually clearer than it felt the day the news came in. See what you will actually walk away with for how that math works.

Third, think about the buyer. A buyer who is ready and able to close has real value. Starting over means new showings and new deadlines, and maybe a new appraisal that comes in the same way.

I call and email every client every Friday, from the day we start until after closing. An appraisal does not wait for Friday, so when one comes in low, you hear from me as soon as I know. I taught for eighteen years, and I still explain the why before I suggest the what. I will tell you what I would do. It is your call, and I will support it either way.

You can see how I handle the rest of a sale on selling a home in Salt Lake City.

Does a low appraisal mean my house is worth less?

It means the appraiser's opinion for the lender came in under the price. It is one opinion, based on the sales the appraiser could find. It is still the number the buyer's loan has to work with.

Do I have to lower my price if the appraisal is low?

No. You can lower it, ask the buyer to cover the gap, meet in the middle, or ask for a second look. If the contract lets the buyer cancel over the appraisal, they may choose to do that.

Can a low appraisal be challenged?

Sometimes. If the appraiser missed a strong sale or got a fact wrong, the buyer's agent can send better information to the lender and ask for a review. It works best when there is a real mistake to point to.

Does a cash buyer need an appraisal?

No lender means no lender appraisal. A cash buyer may still choose to get one for their own peace of mind.

This article is general information and is not legal advice. For questions about contract terms, talk to a Utah real estate attorney.