You’ve had an offer accepted, you’re under contract, and then the appraisal comes back lower than the price you agreed to pay. This is called an appraisal gap, and in competitive markets it happens more often than buyers expect. It matters because lenders won’t lend more than a home is worth — so a low appraisal can leave a hole you need to figure out how to fill.
Why the appraisal matters to your loan
Your lender bases your loan on the lower of the purchase price or the appraised value. If you agreed to pay $350,000 but the home appraises at $335,000, the lender will size your loan against $335,000. That $15,000 difference is the appraisal gap — and it’s money the lender won’t finance, because the home is the collateral and they won’t lend beyond its assessed worth.
Why appraisals come in low
A low appraisal usually happens in a fast-rising or competitive market, where buyers bid above recent comparable sales. Appraisers rely heavily on recent comps, and if prices are climbing faster than closed sales reflect, the appraised value can lag the price you agreed to. It can also happen if the home has condition issues or if there simply aren’t good comparable sales nearby.
Your options when it happens
Pay the difference in cash
If you have the funds, you can cover the gap out of pocket — paying the agreed price while the lender finances only up to the appraised value. In hot markets, some buyers even sign an “appraisal gap guarantee” up front, promising to cover a shortfall up to a set amount to make their offer more competitive. Only agree to this if you genuinely have the cash.
Renegotiate with the seller
You can ask the seller to lower the price to the appraised value, or to meet you somewhere in the middle. A low appraisal is real leverage, because the seller’s next buyer will likely face the same appraisal. Whether the seller budges depends on how much demand there is for the home.
Dispute the appraisal
If you believe the appraiser missed relevant comparable sales or made an error, you (through your lender) can request a reconsideration of value and submit better comps. Success isn’t guaranteed, but it sometimes works when there’s a genuine oversight.
Walk away
If you included an appraisal contingency in your offer, a low appraisal typically lets you cancel the contract and get your earnest money back. This is one of the main reasons appraisal contingencies exist — and why waiving them carries real risk.
How to protect yourself in advance
Before you write an aggressive offer, understand your appraisal contingency and how much of a gap you could realistically cover. If you’re considering waiving the contingency to win in a bidding war, be honest with yourself about whether you have the cash to back it up. Your agent can help you gauge how likely a gap is based on recent sales in the area.
Frequently asked questions
What is an appraisal gap?
It’s the difference between the price you agreed to pay and a lower appraised value. Because lenders finance based on the appraised value, that gap is money you may need to cover in cash or renegotiate.
What happens if the appraisal is lower than my offer?
Your lender will base the loan on the appraised value, not your offer. You can pay the difference in cash, renegotiate the price, dispute the appraisal, or — if you have an appraisal contingency — walk away and recover your earnest money.
Can I get out of the contract if the appraisal is low?
Usually yes, if your offer included an appraisal contingency. That contingency typically lets you cancel and get your earnest money back when the home appraises below the purchase price.
Should I waive the appraisal contingency to win a bidding war?
Only if you have enough cash to cover a potential gap. Waiving it can make your offer more competitive, but it removes your protection and could force you to pay the difference out of pocket or lose your deposit.