What Happens if a Home Doesn't Appraise?


Welcome to another edition of FA Friday! In this series, we explore the ins and outs of real estate financing and appraisal to help both buyers and sellers navigate the complexities of the property market. Today, we delve into a common yet anxiety-inducing scenario: What happens if a home doesn't appraise?

The real estate market can be a roller coaster of emotions, especially when it comes to home appraisals. Appraisals play a critical role in determining the fair market value of a property, which can directly impact the loan amount a lender is willing to provide. But what if the appraisal comes in lower than expected? Let's find out!

Understanding the Home Appraisal Process:

Before we dive into the consequences of a low appraisal, let's quickly review the home appraisal process. When a buyer is seeking a mortgage loan to purchase a property, the lender will typically require an appraisal to assess the home's value. A licensed appraiser, neutral to both the buyer and the seller, conducts a thorough evaluation of the property and nearby comparable sales to determine its fair market value.

Appraisal Shortfall: Causes and Consequences:

A home not appraising at the desired value is not an uncommon occurrence. Several factors can contribute to a lower-than-expected appraisal:

  1. Market Fluctuations: Real estate markets are dynamic and can experience rapid fluctuations. If home prices have declined recently in the area, it could impact the property's appraised value.

  2. Property Condition: The appraiser considers the overall condition of the property, including any necessary repairs or maintenance. A poorly maintained home can lead to a reduced valuation.

  3. Lack of Comparable Sales: In some cases, the lack of recent comparable sales in the vicinity can make it challenging to determine an accurate appraisal value.

  4. Overpricing: If the seller's asking price is significantly higher than the market's actual value, the appraisal may fall short.

Consequences for the Buyer:

When a home doesn't appraise at or above the agreed-upon purchase price, it can have several implications for the buyer:

  1. Reduced Loan Amount: The lender will typically base the loan amount on the appraised value rather than the purchase price. As a result, the buyer may need to make up the difference in cash or renegotiate the price with the seller.

  2. Reappraisal or Appeal: In some cases, buyers have the option to request a re-evaluation or challenge the appraisal results if they believe the valuation was inaccurate.

  3. Renegotiation with the Seller: If the appraisal is lower than the purchase price, the buyer and seller can negotiate a new price that aligns with the appraised value.

Consequences for the Seller:

A low appraisal can be equally concerning for the seller:

  1. Risk of Deal Falling Through: If the buyer can't secure additional funds or renegotiate, they may choose to back out of the deal altogether, leaving the seller back at square one.

  2. Reassessing Market Value: The appraisal outcome can prompt the seller to reevaluate their property's value and make necessary adjustments to attract potential buyers.


A home not appraising at the desired value can be a challenging situation for both buyers and sellers in the real estate market. Understanding the appraisal process, the reasons behind a low appraisal, and the potential consequences is essential for navigating such scenarios. Buyers should be prepared to negotiate, consider alternative financing options, or potentially walk away from the deal if necessary. On the other hand, sellers should remain realistic about their property's value and be willing to adapt to the market's changing dynamics.

Remember, when dealing with appraisals, it's crucial to work with experienced real estate agents and lenders who can guide you through the process and help you make informed decisions. The real estate market can be unpredictable, but with the right knowledge and support, you can overcome the challenges and find the perfect home for your needs.

Stay tuned for more FA Fridays as we continue to explore the fascinating world of real estate finance and appraisal!


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