What to Do When Your Home Appraisal Is Lower Than the Sale Price: 5 Simple Steps

If your home appraisal comes in lower than the sale price, it can feel like a big roadblock. But don’t worry, it’s not the end of the deal. You still have options to keep things moving. Here's what you can do to handle a low appraisal and avoid stress. 

Why Does a Home Appraisal Come in Low? 

A low appraisal happens when the appraised value of the home is lower than the agreed-upon price. This might seem surprising, but it’s pretty common, especially when: 

• The buyer offers a higher price to beat out the competition. 

• There aren't enough recent sales nearby to support the higher price. 

• Market shifts, like fluctuating home prices, play a role. 

Just because your appraisal comes in low doesn’t mean the deal has to fall apart. Here’s how to keep things on track. 

Step 1: Request a Reconsideration of Value (ROV) 

The first thing to do is ask for a Reconsideration of Value (ROV). This process lets you challenge the appraiser’s decision by submitting better comps (comparable sales). Your agent can help with this. If the appraiser accepts your comps, the value could go up, and the deal might move forward. 

But remember, appraisers are part data, part judgment. If they don’t accept your comps, it’s not the end of the road. 

Step 2: Talk to the Seller 

If the ROV doesn’t work, you’ll need to talk to the seller. You can ask them to drop the price to match the appraised value. If they’re motivated to sell, they might be open to this. 

If the seller won’t lower the price, you can try to meet halfway—maybe the seller drops $5,000, and you add $5,000 to your down payment. 

It’s all about keeping things fair for both sides. 

Step 3: Adjust the Loan Amount 

If you’re using a conventional loan, your loan amount will be based on the lower of the appraised value or the sale price. So, if the home appraises for less, your loan amount will decrease. 

For example, if you’re buying a home for $100,000 with 10% down, and the appraisal comes in at $95,000, the Loan to Value ratio will be based on $95,000. But as long as your down payment still meets the loan’s minimum down payment requirements, you won’t need to make major changes to your terms. 

Step 4: Consider a One-Time Mortgage Insurance Premium 

If the low appraisal pushes your loan-to-value ratio higher than 80%, you might have to pay mortgage insurance (MI). If you were planning to avoid MI by putting 20% down, you can avoid monthly MI payments by paying a one-time mortgage insurance premium at closing. This is a lump sum that covers the MI cost upfront, so you don’t have to deal with monthly payments. 

This option has saved the day for some of my buyers in the past because it keeps the monthly payment manageable while still moving forward with the loan. 

Step 5: Stay Flexible and Explore Your Options 

A low appraisal doesn’t have to kill the deal. There are plenty of ways to work through it, whether by negotiating the price, adjusting the loan terms, or using a one-time MI premium. The key is to stay flexible and communicate openly with everyone involved—your agent, the seller, and your lender. 

You’ve got options. Don’t let a low appraisal scare you away from your dream home. 

FAQ: Low Appraisal Questions 

Q: What if the seller doesn’t lower the price?  A: If the seller won’t lower the price, you can try negotiating other terms, like meeting halfway or adjusting your down payment. 

Q: Can a low appraisal kill the deal?  A: Not necessarily. There are ways to work through it, like renegotiating the price, adjusting the loan, or paying a one-time MI premium. 

Q: How do I know if I need mortgage insurance?  A: You’ll need MI if your down payment is less than 20%. If the appraisal pushes your loan-to-value ratio over 80%, MI might be required. 

Q: What’s the difference between an ROV and a regular appraisal?  A: An ROV is a request for the appraiser to reconsider their value based on new comparable sales, while a regular appraisal is the initial assessment. 

Author Bio:  Hi, I’m Rebecca Richardson, a mortgage loan officer with years of experience helping people navigate home buying. I’m here to help you understand the real estate and mortgage process—without the confusing jargon.