How to handle a low appraisal: reconsideration of value, appraisal gap coverage, and walking away
A low appraisal doesn't have to kill a home purchase — but it does require fast, strategic action. This guide explains how to submit a formal Reconsideration of Value (ROV), how to negotiate the appraisal gap with the seller, when appraisal gap coverage makes sense, and when to walk away using your appraisal contingency.
The appraisal came in $20,000 below the purchase price. You have about 48 hours to decide whether to submit an ROV, renegotiate, cover the gap, or exit. Every option has a cost — knowing them in advance is the only way to respond strategically.
Your options when the appraisal comes in low
Works if: the appraiser missed relevant comps or made factual errors. Success rate: 10–20%. Timeline: 3–7 days.
Works if: buyer's market or motivated seller. Seller reduces price to appraised value or splits the gap. Most common resolution.
Works if: you have sufficient reserves and the purchase still makes financial sense. Brings extra cash at closing.
Works if: the first appraisal was clearly deficient and your lender allows it. Uses the lower of two values. Time-consuming.
Last resort if no other resolution. Requires valid appraisal contingency in the contract — exits with earnest money refunded.
Step-by-step: handling a low appraisal
- 1Read the appraisal report carefully before reacting
When you receive the appraisal (you are entitled to a copy at least 3 business days before closing), read the comparable sales used and the adjustments made. Look for: comps that are farther away than necessary (the appraiser didn't use closer sales); comps that are significantly older (6–12 months vs recent sales); adjustments that seem wrong (e.g., a pool adjustment that doesn't match your local market); factual errors (wrong square footage, bedroom count, or condition rating). Document every concern with specific evidence before deciding on a response.
- 2Submit a Reconsideration of Value (ROV) if you have grounds
An ROV is a formal request for the appraiser to review their value using additional evidence you provide. You submit the ROV through your loan officer (not directly to the appraiser). To be effective, the ROV must include: specific comparable sales the appraiser missed (closed within the past 90 days, same subdivision or sub-market, similar size and condition); a clear explanation of why each new comp is more relevant than those the appraiser used; any factual corrections (e.g., if the appraiser used the wrong square footage from tax records). Do not simply argue the appraiser is wrong — give them data. ROV success rate is low without strong evidence: 10–20% of ROVs result in a value change.
- 3Negotiate the appraisal gap with the seller
The most common resolution to a low appraisal is price renegotiation. Approach the seller's agent promptly — every day you wait reduces leverage as the seller may look for backup offers. Options: (1) Seller reduces price to the appraised value — the cleanest resolution; (2) Buyer and seller split the gap — e.g., appraisal gap of $20,000 split 50/50: seller reduces by $10,000, buyer brings an extra $10,000 at closing; (3) Seller refuses to budge — you must then decide whether to cover the gap or exit using your contingency. In a buyer's market, sellers are more likely to reduce the price. In a competitive seller's market, sellers may refuse entirely.
- 4Cover the appraisal gap if the purchase still makes sense
Appraisal gap coverage means the buyer pays the difference between the appraised value and the purchase price out of pocket. Example: purchase price $450,000, appraised value $430,000, gap = $20,000. The lender will finance 80% of $430,000 = $344,000. The buyer needs $106,000 at closing (original down payment of $90,000 + gap of $20,000 − $4,000 saved from lower loan balance) instead of $90,000. Before agreeing to cover the gap, verify you still have adequate post-closing reserves, that the purchase price is still fair relative to comparable sales, and that you won't be underwater immediately.
- 5Order a second appraisal (if your lender allows it)
Some lenders will allow a second appraisal if there is a compelling reason to believe the first was materially flawed — not just that you disagree with the value. Second appraisals typically cost $400–700 and take 1–2 weeks. The lender will generally use the lower of the two values, which limits the upside. A second appraisal is most worth pursuing if: the first appraiser was clearly unfamiliar with the local market (used comps from a different neighborhood); there were factual errors that couldn't be corrected through ROV; or the value difference is large (>5% of purchase price). Ask your loan officer before ordering — lender policies vary significantly.
- 6Exercise your appraisal contingency and exit if necessary
If the ROV failed, the seller won't negotiate, and covering the gap isn't viable, use your appraisal contingency to exit the contract and recover your earnest money. An appraisal contingency allows you to exit if the home appraises below a specified value (usually the purchase price). You must exercise it within the contingency period specified in your contract — missing this deadline can forfeit your earnest money. Give written notice to the seller through your agent before the deadline. In competitive markets where buyers waived the appraisal contingency, you do not have this exit right — covering the gap or losing your deposit are the only options.
External references
- FHFA — Appraisal Reconsideration of Value (ROV) policies
- CFPB — Your right to receive the appraisal
- NAR — Confidence Index (appraisal issue frequency)
- HUD — Homebuying process and buyer protections
Common questions
What is a Reconsideration of Value (ROV)?
A Reconsideration of Value (ROV) is a formal request, submitted by your lender to the appraiser, asking them to review their conclusion in light of additional evidence — typically comparable sales the appraiser did not consider. ROVs became more formalized after the FHFA issued guidance in 2022–2024 requiring lenders to have ROV processes that are borrower-accessible and free from lender pressure on the appraiser. You submit your ROV request and supporting comps to your loan officer, who transmits it to the appraisal management company (AMC), which routes it to the original appraiser. The appraiser must respond, but is not required to change the value — only to acknowledge and document the new evidence. The FHFA ROV policy announcement describes the updated standard.
Can I waive the appraisal contingency in a competitive market?
Yes — appraisal contingency waivers are common in competitive markets where multiple offers are expected. By waiving, you agree to pay any gap between the appraised value and the purchase price or forfeit your earnest money if you can't close. Before waiving: (1) Verify you have sufficient cash reserves to cover a potential gap — budget for a 5–10% gap as a worst case; (2) Research recent comparable sales to assess how likely a low appraisal is; (3) Consider a modified waiver — you agree to cover the gap up to a specified dollar amount (e.g., "buyer will cover any gap up to $25,000"), beyond which you retain the right to exit. Full waiver with no limit is the highest-risk approach. Understand that an appraisal contingency is a consumer protection — waiving it is a risk transfer from seller to buyer. CFPB closing process guide.
How often do appraisals come in below purchase price?
Low appraisals are relatively rare in stable or rising markets but become more common when: prices are rising faster than the available comparable sales data can support (i.e., "appraisal lag"); the local market is thin with few recent comps; the property is unique and hard to compare; or the buyer paid a significant premium over asking price. In the 2021–2022 US market, low appraisals were reported in 10–15% of transactions during the peak price surge. In normalized 2027 markets, the rate is closer to 3–7%. The NAR Confidence Index tracks the frequency of appraisal issues causing transaction delays monthly.
What happens to my earnest money if the appraisal is low?
If you have an appraisal contingency and the home appraises below the purchase price (or below the specified threshold in your contract), you can exit the purchase and receive your earnest money back in full — provided you exercise the contingency properly and within the deadline. If you waived the appraisal contingency and the home appraises low, you must either cover the gap or forfeit your earnest money to exit the contract. If the contract doesn't specify an appraisal contingency (less common in standard contracts), the outcome depends on your jurisdiction's default rules. Always have an attorney review any offer before signing, especially in competitive markets where contingency waivers are common. HUD homebuying resources explain buyer protections in the purchase process.
Can the appraised value come in above the purchase price?
Yes — and it's actually good news for the buyer. If the home appraises above the purchase price, you've immediately gained equity: the loan is still based on the lower of the purchase price or appraised value, so your down payment percentage and rate tiers are unchanged. But you've purchased a home worth more than you paid. This often happens when: a buyer negotiates a strong discount below asking; market conditions shifted favorably; or the appraiser used strong comparable sales. High appraisals don't give you access to additional funds — you can't borrow more than the purchase price on a purchase mortgage. However, this instant equity position may allow you to request cancellation of PMI sooner, or access a HELOC more quickly after closing. See the LTV glossary entry for how appraisal value and LTV interact.
How long does a Reconsideration of Value take?
An ROV typically takes 3–7 business days for the appraiser to review and respond. During this time, your closing date may need to be pushed back — notify your contract counterparty (seller) and your lender of the timeline. Some appraisers respond within 1–2 days; others take the full week. If the ROV is denied (value unchanged), you receive a written explanation from the appraiser. If the ROV is successful and the value is increased, the lender will update the appraisal in their underwriting system and you can proceed to close. Build 10–14 days of buffer into your closing timeline if you suspect an appraisal issue — last-minute ROV requests create closing delays. FHFA ROV process timeline guidance.
Learn more about how appraisals work, read the home buying timeline, or model your down payment scenarios on the mortgage calculator.