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What to Do: Low Property Appraisal

March 22, 2012

The phone rings. It’s your lender. Your home appraisal just came in $5,000 below sales price.

What was shaping up to be a smooth home purchase just got rocky. With uncertainty surrounding property values across the USA, a low property appraisal has become more common. So what do you do when such a situation arises that could kill the deal?

First, stay calm. Get in touch with your real estate agent and run through the options. If you made it this far, everyone involved is probably operating in good faith. All parties would like to see the transaction close. Given those assumptions, your options include:

1.     Dispute the Appraisal

2.     Talk with your Lender

3.     Buyer Pays More Down

4.     Seller and Buyer Negotiate

5.     Seller Reduces Price

1. Dispute the Appraisal

Talk with your REALTOR®. Is the contract sales price a fair assessment of the property value based on a well-prepared comparable market analysis (CMA)? Disputing the appraisal may sound out of the norm, but to dispute a property appraisal could be reasonable depending on a few key factors:

  • Where is the appraiser based? Did they perform an appraisal in a housing market that they may not know well?
  • Did the appraiser have adequate information about the subject property? (Perhaps the hardwood floors and the granite countertops were items of value that the appraiser overlooked.)
  • What were the comparable properties that were used in the appraisal? Were the comparable properties fair? Oftentimes, agents involved in the transaction have actual knowledge of the comparable properties, and can assist the appraiser.

After providing an appraiser with a handful of further pertinent comparables, the appraisal can sometimes be adjusted to come in at the contract sales price.

2. Talk with your Lender

If the appraiser is standing firm on their assessment of the property, speak with your lender about the possibility of ordering a new appraisal. The lender does have the ability to override the appraisal estimate (unlikely to occur) or order a new appraisal (more likely). If a new appraisal is ordered, talk with your REALTOR® about somehow splitting the cost. Perhaps the listing agent and selling agent will split the fee so the buyer does not have to incur additional costs associated with the transaction.

3. Buyer Pays More Down

If the homebuyer desires the home badly enough, making a larger down payment may be a possibility. One issue here is that by having the buyer pay more down, it establishes negative equity in the home. That is, the amount of the loan plus the larger downpayment is greater than the appraised value of the property. It should be noted that even if the buyer is willing to take this risk, the lender may not approve a loan under these terms.

4. Seller and Buyer Negotiate

Having an appraisal come back below the contract sales price may open the door to negotiation between the seller and buyer. A little give-and-take has probably taken place up to this point, and both parties may want to continue negotiating in order to bring the property to close.

5. Seller Reduces Price

Given the situation, the seller may be willing to negotiate to save the sale of their property. However, if there was a hard negotiation on sales price and inspection items, the seller may not be willing to take this course of action.

A REALTOR® should always protect their buyer with a contingency clause in the contract to buy and sell residential real estate, stating that the transaction can be terminated if the home doesn’t appraise at, or above, the sales price.

At the end of the day, all parties want to see the property appraised at a fair value, which should be as close as possible to the contract sales price.



First, complete a loan application on our website
-Go to
-Click on Apply Now at the top
-Scroll to the middle of the page and Click on 3. Full Application
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