Your offer was accepted and financing looked settled. Then the appraiser comes back with a number below the agreed price. Your file isn’t rejected, but you now have a cash problem to solve before closing.
Lenders finance value, not price
The lender calculates your loan on the appraised value or the purchase price, whichever is lower. Offer $500,000 on a home that appraises at $480,000 and the math runs on $480,000. The $20,000 gap doesn’t vanish. It gets added to your down payment.
Why the gap happens
Most often, comparable sales don’t support the price. In a hot market, offers climb faster than the closed sales an appraiser can cite. It also happens with unusual properties, in rural areas, or when recent renovations haven’t reached the records yet.
Your options, in order
- Cover the gap in cash, if your reserves allow it.
- Renegotiate the price with the seller, appraisal in hand.
- Request a review if the appraiser missed comparables or recent work.
- Apply through another lender, which sometimes means another appraiser.
- Walk away, if your offer kept a financing condition.
Reducing the risk before you offer
Keep a reserve beyond your down payment. Hold on to the financing condition even when there are multiple offers. And be careful about bidding well past recent sales in the area. A broker can give you a sense of the comparables before you write the offer, not after.
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