One of the most stressful moments during a real estate transaction occurs when the appraisal comes back lower than the agreed-upon sales price. Whether you're buying your first home, using a VA loan, or selling your current property, a low appraisal can create challenges—but it doesn't necessarily mean the deal is dead.

Understanding what happens next and knowing your options can help you navigate the situation with confidence.

What Is a Home Appraisal?

A home appraisal is an independent opinion of a property's market value performed by a licensed appraiser. Lenders require appraisals to ensure they are not lending more money than the property is worth.

The appraiser evaluates:

• Recent comparable sales (comps)
• Property condition
• Square footage
• Location
• Upgrades and improvements
• Current market trends

The appraised value helps determine how much the lender is willing to finance.

Why Do Homes Appraise Low?

Several factors can contribute to a low appraisal:

• Rapidly rising home prices
• Limited comparable sales
• Unique property features
• Overpriced listing
• Market shifts between contract and appraisal
• Errors or missing information in the appraisal report

In competitive markets, buyers sometimes offer above asking price, creating a gap between market demand and appraised value.

Example of a Low Appraisal

Let's say a buyer agrees to purchase a home for $400,000.

The appraisal comes back at $385,000.

The lender will generally base the loan amount on the lower appraised value rather than the contract price. This creates a $15,000 appraisal gap that must be addressed before closing.

Options for Buyers

1. Renegotiate the Purchase Price

The most common solution is for the seller to lower the sales price to match the appraised value or meet somewhere in the middle.

Many sellers choose this option to keep the transaction moving forward.

2. Pay the Difference in Cash

Buyers can bring additional funds to closing to cover the appraisal gap.

Using the example above, the buyer may contribute the extra $15,000 out of pocket if they have the available funds.

3. Split the Difference

Buyers and sellers often negotiate a compromise.

For example, the seller may reduce the price by $7,500 while the buyer contributes the remaining $7,500.

4. Challenge the Appraisal

If there are factual errors or stronger comparable sales available, the lender may allow a Reconsideration of Value (ROV).

This process provides additional evidence supporting a higher valuation.

5. Cancel the Contract

Depending on the financing contingency and contract terms, buyers may have the right to terminate the contract if an acceptable resolution cannot be reached.

Always consult your real estate agent and lender before making this decision.

Options for Sellers

Review the Appraisal Carefully

Appraisers can make mistakes. Incorrect square footage, missed upgrades, or poor comparable selections can affect value.

Provide Additional Comparable Sales

Your REALTOR® may identify stronger recent sales that better support the contract price.

Reduce the Sales Price

While not ideal, reducing the price may be preferable to putting the home back on the market.

Wait for Another Buyer

If market conditions are strong, a seller may choose to relist the property and seek another buyer.

Keep in mind that future appraisals could reach similar conclusions.

How VA Loans Handle Low Appraisals

VA buyers have additional protections.

If a VA appraisal comes in low, buyers may pursue a Reconsideration of Value through the VA process. This allows additional comparable sales and supporting information to be reviewed.

VA buyers also typically have an appraisal contingency that protects them if the property does not appraise for the agreed purchase price.

Working with a REALTOR® experienced in VA transactions can be especially valuable when navigating appraisal challenges.

VA Loan Appraisals: Understanding Tidewater and Reconsideration of Value (ROV)

One of the unique advantages of a VA loan is the additional protection provided to veterans and active-duty military buyers when a property may not support the agreed-upon sales price.

What Is the VA Tidewater Process?

Before a VA appraiser officially submits an appraisal that is likely to come in below the contract price, they are required to notify the lender through what is commonly called the Tidewater Initiative.

This process gives interested parties—typically the lender and real estate agents—an opportunity to provide additional market data before the appraisal is finalized.

During the Tidewater period, agents may submit:

• Recent comparable sales not previously considered
• Pending sales that support the contract price
• Information about recent upgrades or improvements
• Local market data that may impact value

The goal is to ensure the appraiser has the most complete and accurate information available before issuing a final opinion of value.

How to Reduce the Risk of a Low Appraisal

What Happens If the VA Appraisal Still Comes in Low?

Even after Tidewater, the final appraised value may still be below the contract price. When this happens, buyers and sellers can negotiate just like they would with any other loan type.

Potential solutions include:

• The seller lowers the purchase price
• The buyer brings additional cash to closing
• The buyer and seller split the appraisal gap
• The transaction is terminated according to contract terms

What Is a Reconsideration of Value (ROV)?

If the buyer, lender, or agents believe the appraisal is inaccurate or does not reflect current market conditions, a Reconsideration of Value (ROV) may be requested.

An ROV is a formal request asking the VA appraiser to review additional evidence that may support a higher value.

Common reasons for requesting an ROV include:

• Stronger comparable sales were overlooked
• Recent sales closed after the appraisal inspection
• Property improvements were not fully considered
• Factual errors exist within the appraisal report

The lender submits the request along with supporting documentation, and the VA appraisal reviewer evaluates the new information before making a final determination.

Can an ROV Increase the Appraised Value?

Yes, in some cases. If the additional evidence supports a higher value, the appraisal may be revised. However, there is no guarantee that the value will change.

This is why it is important to work with a REALTOR® who understands VA appraisals and can quickly provide strong comparable sales and market data when needed.

Why Tidewater and ROV Matter for Veterans

The Tidewater Initiative and Reconsideration of Value process are two unique safeguards that help protect veteran homebuyers. These programs recognize that real estate markets can change rapidly and that appraisers may not always have access to every relevant comparable sale.

For many veterans, these protections have helped preserve transactions that otherwise might have fallen apart due to appraisal concerns.

• Work with an experienced local REALTOR®
• Review recent comparable sales before making an offer
• Avoid dramatically overpaying in competitive markets
• Provide a detailed list of upgrades to the appraiser
• Ensure the home is clean and well-maintained before the appraisal visit

Final Thoughts

A low appraisal can feel like a major obstacle, but it is often a negotiable issue rather than a deal-breaker. Buyers and sellers have several options available, including renegotiating the purchase price, covering the appraisal gap, challenging the valuation, or restructuring the transaction.

The key is having knowledgeable professionals on your side who understand the local market and can help you evaluate the best path forward.