A low appraisal may reduce the loan amount available and increase the cash you need to complete the purchase. Your choices can include negotiating the price, reviewing financing alternatives, or considering contract rights with your agent or attorney. Start with the appraisal and an updated cash-to-close calculation.
The purchase price and lending value are different numbers
An appraisal is an independent opinion of value. Agreeing on a price does not guarantee the property will appraise at that price. Ask your lender for a copy of the report and an explanation of how the result affects your specific loan.
A hypothetical example of the cash impact
If an appraisal is below the contract price, the lender may reduce the available loan. If the price stays the same, that can increase the cash required. The extra cash is the change in the available loan, which is not necessarily the full appraisal gap. Ask for a revised cash-to-close calculation for your specific program.
If the lender caps this example’s loan at 80% of the lower value, the loan becomes $620,000. Keeping the $800,000 contract price would mean $180,000 toward the price—$20,000 more cash than planned, not automatically the full $25,000 appraisal gap.
Illustrative assumptions only. The available loan, mortgage insurance, and program requirements can differ. Closing costs and reserves are excluded.
Work through the actual options
First, get the lender’s revised figures. Then discuss whether the seller will adjust the price. Before offering extra cash, consider how much savings you would retain after closing and whether buying at the agreed price still makes sense to you.
Review any contract deadlines with your real estate agent. Cancellation rights and deposit consequences depend on the agreement and circumstances; an appraisal result alone does not tell you whether you can exit without a cost. Seek legal advice when needed.
What if you think the report contains an error?
Ask the lender about its process for reporting factual errors or requesting a reconsideration of value. Keep the request specific: identify the disputed fact and the evidence supporting a correction. Disagreeing with the value is not, by itself, proof the appraisal is wrong.
An appraiser must remain independent. A review does not guarantee a higher value, and you should not rely on a change until the lender confirms the outcome.
Keep the financing and contract conversations connected
Eric’s experience both as an appraiser and a mortgage loan officer provides useful context for discussing the financing implications. It does not replace the lender’s appraisal process or the independent appraiser’s judgment.
Before deciding, write down the revised loan amount, required cash, remaining reserves, and the date by which you must act. Those four numbers make the conversation more useful than focusing only on the size of the appraisal gap.
Explore jumbo financing or talk through the financing impact with Eric.
Sources & further reading
General education, not a rate quote, approval, or individualized recommendation. Program terms and availability vary. Examples are hypothetical and exclude expenses unless stated.