What Happens When a Home Does Not Appraise in Richmond, VA?
You've agreed on a price, you've made it through the inspection, and now you're thinking about closing day. Then the appraisal comes in $10,000 low.
Does the buyer have to find more money? Does the seller have to lower the price? Is the deal dead? Not necessarily. A low appraisal can feel like somebody threw a wrench into a deal that was moving along just fine. Most of the time, though, it doesn't mean panic, and it doesn't automatically mean the deal is over. It means we have a problem to solve.
I'm Curt Reichstetter with Two Dog Realty, and here's how we walk buyers and sellers through it.
THE SHORT ANSWER A low appraisal usually isn't the end of the deal. The lender will generally base the loan on the lower appraised value, so there's a gap to solve. First, make sure the appraisal makes sense. Then the seller may come down in price, the buyer may cover some of the gap, or both sides may share it. Sometimes there is no path forward, but a low appraisal is not usually the end of the conversation. |
What does a low appraisal actually mean?
An appraisal is not a home inspection, and it isn't a magic answer to what a home is worth to every buyer. It's the lender's way of deciding how much it is comfortable lending on that house.
Let's use easy numbers. Say a buyer agrees to pay $400,000, but the appraisal comes back at $390,000. The lender will generally base the loan on the $390,000 value, not the $400,000 contract price. Now there's a $10,000 gap, and the question becomes how we bridge it. Those are round numbers to show how it works, not a specific home. If you want to see where the appraisal falls in the timeline after you go under contract, From Pending to Closing: What Happens After You Go Under Contract walks through it.
Should you question the appraisal first?
Before anyone starts negotiating, we look at the appraisal. Did the appraiser use the best comparable sales? Is the square footage right? Did they miss an important feature of the home, or a very recent nearby sale?
Sometimes there is a legitimate reason to ask the lender to take another look. But it can't just be "we don't like this number." There has to be something real that was missed. And sometimes, after looking at it, the appraisal makes sense. Then we stop arguing with the number and start figuring out the best path forward.
Real Client Story: A $10,000 Appraisal Gap
We had a transaction where the appraisal came in $10,000 below the contract price. We represented the buyers, and they really wanted the house. It fit what they needed, and walking away wasn't their first choice. So we went to work.
We negotiated with the sellers, and in the end the sellers came down $5,000. Our buyers agreed to make up the remaining $5,000. The deal stayed together, and everybody got to move on.
It didn't happen automatically. It took work, and it took both sides wanting to find a solution. But neither side had to absorb the whole gap. It doesn't always have to be 50/50 either. From the seller's side, the sale stayed together instead of going back on the market. From the buyers' side, they kept the house they wanted without carrying the whole surprise alone.
What are the usual ways to solve a low appraisal?
There are four ways we see most often. Which ones are open to you depends on the contract and the loan, so talk it through with your agent and your lender before you assume anything.
The way forward | What it looks like | What to keep in mind |
The seller lowers the price | The price comes down to the appraised value. It's the most straightforward answer. | The seller doesn't have to do it. They decide whether working with this buyer gets them to closing more reliably than putting the home back on the market. If the next buyer needs financing, the appraisal may become the issue again. |
The buyer covers the gap with cash | The buyer pays all or part of the difference out of pocket. | That's real money on top of the down payment and closing costs, so it's a conversation we have before writing a strong offer, especially when the offer is above recent comparable sales. |
Both sides share it | The seller comes down some and the buyer makes up the rest, as in our example. | Often the answer ends up somewhere in the middle. Buyer and seller can work out whatever arrangement makes sense for them. |
Nobody moves | The buyer doesn't want to bring in more money, and the seller doesn't want to reduce the price. | We look carefully at the contract, the deadlines and each side's rights. Depending on how the offer was written, the buyer may have a way out, and there may still be room for a conversation. The details matter. |
Because the lender's rules and your financing matter so much here, a good lender conversation early helps. I wrote about what to compare in How to Choose the Right Mortgage Lender in Richmond, VA.
What should sellers know about a low FHA appraisal?
There's one extra thing sellers should know about FHA financing. A low FHA appraisal can sometimes still matter if the first buyer doesn't close and the seller finds another FHA buyer.
So before walking away from an FHA contract over a low appraisal, have the lender explain what that could mean for you. It doesn't make an FHA deal bad. It just means you should understand the situation before you decide.
Why isn't the highest offer always the best offer?
Because the number on the offer only helps you if it holds up. That's why we don't wait for the appraisal to start thinking about it.
For buyers, we look at recent sales, the offer price, and what you're comfortable doing if the appraisal comes in low.
For sellers, we don't just look at the highest number on an offer. We look at the financing, the language in the offer, and whether that price has a good chance of being supported.
The highest offer isn't always the best offer if it falls apart when the appraisal comes in. If you're selling, How to Evaluate Offers on Your Richmond Home covers how to compare price, financing and contract terms. If you're buying, How to Win a Home in Richmond Without Overpaying explains how to compete without leaving yourself exposed.
THE PRACTICAL LESSON If a home appraises low, don't panic. First, make sure the appraisal makes sense. Then look at the choices: the seller may come down, the buyer may cover some of the gap, or both sides may share it. Good preparation and good negotiation can make a big difference. |
How Heather and I help you prepare before an appraisal comes in
At Two Dog Realty, Heather and I handle every client ourselves, with no handoffs. For buyers, that means we talk about recent sales and what you're comfortable doing if the appraisal is low before you write the offer. For sellers, it means we look at the financing and the language in an offer, not just the number at the top. Then, if the appraisal does come in short, you're working with the same people who helped you plan for it.
Key Takeaways
A low appraisal doesn't automatically end the deal. It means there's a problem to solve.
The lender will generally base the loan on the lower appraised value, not the contract price.
First, make sure the appraisal makes sense. Ask for a second look only if something real was missed.
The common ways forward are a lower price, buyer cash, a shared gap, or, when nobody moves, a careful look at the contract.
Sellers with an FHA buyer should have the lender explain a low appraisal before anyone walks away.
The highest offer isn't always the best offer if it falls apart when the appraisal comes in.
Frequently Asked Questions
What happens when a home does not appraise in Richmond, VA?
The lender will generally base the loan on the lower appraised value, which leaves a gap between that value and the contract price. Buyers and sellers then look at ways to bridge it, such as a price reduction, extra cash from the buyer, or a split. Curt Reichstetter of Two Dog Realty recommends first making sure the appraisal makes sense.
Does a low appraisal mean the deal is dead?
Not usually. Most of the time it means there is a problem to solve, and the answer is often a negotiation rather than a dead end. Sometimes there is no path forward, but a low appraisal is not usually the end of the conversation.
Who pays the difference when a home appraises low?
It depends on the contract and on what the buyer and seller agree to. The seller may lower the price, the buyer may cover some or all of the gap with cash, or they may share it. It doesn't always have to be 50/50. In one of our transactions, the sellers came down $5,000 and our buyers made up the other $5,000.
Can a buyer or seller challenge a low appraisal?
Sometimes there is a legitimate reason to ask the lender to take another look, such as better comparable sales that were missed, an incorrect square footage, or an important feature or very recent nearby sale the appraiser didn't consider. But it can't just be that you don't like the number. There has to be something real that was missed.
Does the seller have to lower the price if the appraisal is low?
No. Lowering the price to the appraised value is the most straightforward answer, but the seller has to decide whether working with this buyer gets them to closing more reliably than putting the home back on the market. If the next buyer needs financing, the appraisal may become the issue again.
Can a buyer walk away if the appraisal comes in low?
It depends on how the offer was written. Depending on the contract, the deadlines, and each side's rights, the buyer may have a way out, and there may still be room for a conversation. Review the contract with someone who understands it before you decide.
Is an appraisal the same as a home inspection?
No. An inspection looks at the condition of the home. An appraisal gives the lender an opinion of value so it can decide how much it is comfortable lending on the house.
How can a buyer prepare for a possible low appraisal?
Before writing a strong offer, look at recent sales and decide what you are comfortable doing if the appraisal is low. Covering a gap with cash is real money on top of your down payment and closing costs, so it is worth talking through ahead of time, especially when an offer is above recent comparable sales.
Does a low FHA appraisal matter to a seller?
It can. A low FHA appraisal can sometimes still matter if the first buyer doesn't close and the seller finds another FHA buyer. Before walking away from an FHA contract over a low appraisal, have the lender explain what that could mean for you. It doesn't make an FHA deal bad; it just means you should understand the situation first.
Why isn't the highest offer always the best offer?
Because a high price only helps if it holds up. We look at the financing, the language in the offer, and whether the price has a good chance of being supported. The highest offer isn't always the best offer if it falls apart when the appraisal comes in.
Keep Learning
How to Evaluate Offers on Your Richmond Home: comparing price, financing, appraisal exposure and contract terms
How to Win a Home in Richmond Without Overpaying: how preparation and contract terms help buyers compete
From Pending to Closing: What Happens After You Go Under Contract: where the appraisal fits in the timeline
How to Choose the Right Mortgage Lender in Richmond, VA: what to compare before you trust a lender with your purchase
Pricing Your Richmond Home: Strategies, Tactics, and Techniques: how comparable sales shape the list price
Browse the Buying and Selling questions in the Two Dog Realty FAQ
Thinking about buying or selling in Richmond?
If you're buying or selling a home in the Richmond area and want to talk through these kinds of issues before they become surprises, book a strategy call. Heather and I are always happy to help.
Curt Reichstetter
Two Dog Realty
804-370-1210
curt@curtsellsrva.com
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