What Happens When the Appraisal Comes In Low?
Appraisal gaps are common in competitive Bay Area markets. Here's what they are, why they happen, and what your options are.
Schedule a ConsultationWhat Is an Appraisal Gap?
Last updated: August 2026
An appraisal gap occurs when the home's appraised value comes in lower than the agreed-upon purchase price. For example, if you agree to buy a home for $1,200,000 but the appraisal comes in at $1,150,000, there's a $50,000 appraisal gap.
This matters because most lenders will only finance up to the appraised value. If the appraisal is lower than the purchase price, the buyer must either make up the difference in cash, renegotiate the price, or walk away — depending on the contract terms.
Why it's common in the Bay Area: In competitive markets with multiple offers, buyers often bid above asking price. When the final price exceeds what comparable sales support, the appraisal may come in low — creating a gap.
Your Options When the Appraisal Comes In Low
Cover the Gap in Cash
You make up the difference between the appraised value and the purchase price with your own funds. This is the most common outcome in competitive Bay Area markets.
Renegotiate the Price
Ask the seller to lower the purchase price to the appraised value. The seller may agree, especially if they're concerned the next buyer's appraisal will also come in low.
Challenge the Appraisal
If the appraiser missed relevant comparable sales or made errors, your lender can request a reconsideration of value. This isn't always successful but can work when there's a legitimate basis.
Walk Away
If you have an appraisal contingency in your contract, you can typically cancel the transaction and recover your earnest money deposit if the appraisal comes in low and you can't reach an agreement with the seller.
How to Prepare for a Low Appraisal as a Seller
Price Realistically
Overpricing can attract low appraisals. If your home is priced well above comparable sales, the appraised value may not support the price — even if a buyer is willing to pay it.
Provide a Comparable Sales Sheet
I prepare a detailed list of recent comparable sales for the appraiser, highlighting the most relevant properties and improvements that support your home's value.
Highlight Upgrades and Features
Document any upgrades, renovations, or special features that add value. The appraiser may not know about improvements unless they're documented.
Consider the Offer Terms
An all-cash offer with no appraisal contingency eliminates the appraisal risk entirely. An offer with a large appraisal gap waiver signals the buyer is prepared to cover a shortfall.
Frequently Asked Questions About Appraisal Gaps
What happens if a home appraisal comes in low?
If the appraisal comes in below the agreed purchase price, the buyer and seller can renegotiate the price, the buyer can make up the difference in cash, the buyer can invoke the appraisal contingency and cancel, or the lender may not approve the loan at the original terms. In competitive Bay Area markets, buyers often cover appraisal gaps to keep their offer competitive.
What is an appraisal gap?
An appraisal gap is the difference between the home's appraised value and the agreed-upon purchase price. For example, if you agree to buy a home for $1,200,000 but the appraisal comes in at $1,150,000, the appraisal gap is $50,000. Most lenders will only finance up to the appraised value, so the buyer must cover the gap in cash or renegotiate.
Can I cancel a contract if the appraisal comes in low?
Yes, if your purchase agreement includes an appraisal contingency. The appraisal contingency allows you to cancel the contract and recover your earnest money if the appraisal comes in below the purchase price and you cannot reach an agreement with the seller. If you waived the appraisal contingency, you are committed to the purchase even if the appraisal is low.
Who pays for an appraisal gap?
The appraisal gap is typically covered by the buyer, either by making up the difference in cash or by renegotiating the price with the seller. In a buyer's market, the seller may agree to lower the price. In a seller's market like the Bay Area, buyers often agree in advance to cover a gap up to a certain amount to make their offer more competitive.
Can you challenge a low appraisal?
Yes. If the appraiser missed relevant comparable sales or made factual errors, your lender can request a reconsideration of value. This involves providing additional comparable sales data that supports a higher valuation. Success is not guaranteed, but it can work when there is a legitimate basis for the challenge.
Questions About Appraisal Gaps?
Whether you're buying or selling, I'll help you understand your options and prepare for every scenario — including a low appraisal.