Low home appraisals: Understanding the next steps

by Debbie Goldberg 03/26/2023

The process of purchasing a home can be tedious, as there are many legalities and service providers you’ll work with to accomplish buying a property. One of these vital steps is the appraisal process, in which mortgage lenders send over a professional appraiser to examine a property.

This is done to make sure its value is equivalent to the loan amount being requested. If you get a low appraisal offer, it’s valuable to know your options to proceed forward in the most orderly way possible.

What happens if an appraisal comes back lower than the offer price?

Sometimes the appraised value of a home will come back lower than the requested loan amount due to a number of factors. If the home fails to meet certain guidelines, your lender may decide to offer you less funding than originally requested or may not agree to the loan at all.

However, there are options in favor of the buyer in the case a home appraisal comes in lower than expected.

How do you negotiate with a seller after a low appraisal?

In the case of a low appraisal, it’s essential to do research to get a better understanding of why the report came back lower than the purchase price. Research the local real estate market because in some cases, if the home has been on the market for a while, the listing price may be outdated.

If the low appraisal was justified, you can negotiate with the seller to help pay for needed repairs or ask if they can meet you in the middle with their listing price.

Can buyers back out if the appraisal is low?

If there is an appraisal contingency in the purchase agreement, a buyer can back out of a home purchase if the appraisal comes back too low. This is why it’s vital to examine and pay close attention to detail with the help of your real estate agent to all items in the purchase contract.

A low home appraisal isn’t the end of your home buying process, it’s simply an obstacle that can be overcome with research and planning.

About the Author

Debbie Goldberg

I'm a full time Realtor with over 30 years of experience yet young enough to embrace today's ever-changing scope of marketing and technology. Having grown up in Connecticut and moved many times (too many to count!) I can empathize with today's buyers and sellers. Strictly maintaining ethical standards and being a fierce advocate on behalf of my clients are things I take very seriously. As a buyer, you can expect me to listen to and evaluate your real estate wants and needs. I can assist in explaining relevant forms, agreements, and closing procedures. I will guide you through the process of finding the right home, negotiating your offer, adhering to all contract dates and terms as well as final walk through and closing procedures. As a seller, I will listen to and evaluate your goals, needs, and timing in order to properly price your home to get the maximum exposure needed to attract the right buyers. In addition to negotiating on your behalf, I will make sure we communicate throughout the entire process as we navigate the contract terms, finance and inspection contingencies, as well as all closing procedures. I was born in Japan, grew up in Hamden and lived in New York, Ohio and Southern California before settling down in New Haven county to raise two kids, two dogs and a cat. I'm passionate about good food and love to bake. Some of my free time has been spent volunteering at Temple Beth Sholom, a synagogue where my family has been members for over 40 years. I also spend time at Tower One/Tower East, an assisted living center in New Haven where my mother-in-law now resides. 30 years of helping buyers and sellers achieve their goals has given me the peace of mind to know that what I do everyday matters. If you are thinking of buying or selling please keep me in mind.