What Happens When My Appraisal Comes in Low (or High!)?

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

What Happens When My Appraisal Comes in Low (or High!)?


You’re in the process of buying a home, and so far things have been going pretty smoothly.  Your lender has pre-approved you, your Realtor has found you the perfect home, and with a bit of luck, the seller accepted your offer and now you’re in contract.  It’s very likely that early on in your loan process --- usually within the first few days of having your offer accepted --- your lender ordered an appraisal.  From there, a licensed appraiser went out to the property and then turned in a completed appraisal report (which, at its core, is a professional opinion of value).  Of course, you know the dollar amount you’re paying for the home because that figure is on your contract.  But what happens if the appraisal doesn’t support that price?  What happens if the appraisal comes in low, or for that matter, high?  Let’s take a look.


My Appraisal Came in Low

I’m in California and I like to use round numbers, so let’s say you’re buying a home for a cool $1,000,000.  You are putting 20% down ($200,000), and you are getting a loan for $800,000.  We would say your loan-to-value (LTV) is 80%.  When your lender pre-approved your loan, he probably structured most of the important aspects of your financing, such as program selection, approval guidelines, interest rate, etc., on the assumption you would have an LTV of 80% or less.  Let’s say the appraiser goes out to the home, does the best job she can and after all comparable properties (“comps”) are analyzed, can only support a value for the home of $975K. How does the lender react to this information?  For conventional mortgages, the lender will use the lesser of the purchase price or appraised value to determine the LTV.  This is the key concept and we’ll come back to it in a minute and in a different scenario, but for now, let’s go to the chalkboard and do the math:


Before appraisal:

  • $1,000,000             Contract price
  • ($1,000,000)          Assumption of value
  • $800,000                Loan amount
  • 80%                        Loan-to-Value


After appraisal:

  • $1,000,000             Contract price
  • $975,000                Appraised value
  • $800,000                Loan amount
  • 82%                        Loan-to-Value


Houston, we have a problem.  If your loan approval has rested on the assumption that you have an LTV of 80% of less, we can see that this is no longer the case.  This buyer might pursue these options to remedy the matter:


  1. Use a different loan program that might accommodate the higher loan-to-value.  This might mean taking PMI (private mortgage insurance), or using a piggyback loan, for example.
  2. “Making up the difference in cash.”  To produce an 80% LTV against a value of $975K, the loan amount would be $780K.  Assuming the purchase price stays at $1MM, this buyer, who would have previously made a down payment of $200K, will now need to make a down payment of $220K.
  3. Renegotiate the contract.  Often, we’ll see the buyer go back to the seller and ask for some concession on the price.  Maybe the seller will be willing to reduce the price slightly to keep the transaction moving forward, instead of falling out of contract and starting over with a new buyer.
  4. Rebut the appraisal.  Perhaps factual error or oversight of a strong comp caused the appraised value to be lower than it might be otherwise.  Buyers can opt to have their lender pursue a reconsideration of value.  Word to the wise, many rebuttals come back with no change.  In other words, they uphold the original appraisal.  But most also chew up a lot of contractual time.  Pursuing a reconsideration can be a gamble with a low probability of success.
  5. Try a new appraisal?  Hold on a second --- this is not a valid option, but I bring it up because we do get the question.  So long as you stay with the lender who performed the original appraisal, ordering a new appraisal to “value fish” is not permitted.


The last important point about a low appraisal value is that it may only matter to the buyer whose loan is near an important loan threshold or guideline.  In our example above, the reason the low appraisal triggered significant changes is because the 80% LTV threshold is important in conventional lending.  And there are others like it you may not recognize, but that your lender can explain.  However, let’s say our buyer above was putting $500K down on a purchase of $1MM (50% LTV) and the appraisal comes back at $975K.  Now the LTV is 51%.  Big deal.  No key lending thresholds are crossed and this borrower very likely sees zero change to his terms.


What Happens If My Appraisal Comes in High?

Well, this paragraph is going to be a lot shorter.  In conventional lending, and for a purchase transaction, you cannot “monetize” an appraisal value that comes in above the purchase price.  Again, we use the lesser of the purchase price or appraised value to determine LTV.  Still, it’s great news.  You are getting a deal on the home, but in terms of making a smaller down payment or otherwise leveraging the higher value, there are “no dice” here.  Yes, down the road that higher value might allow you to refinance with greater ease and/or better interest rates, but practically speaking an appraisal that comes in higher than contract price is really just a vote of confidence.


If you’re reading this post and find yourself in a bind because your appraisal just came in low, don’t hesitate to get in touch.  We have a large selection of mortgage programs that grant more flexibility with LTV, and we have a lot of experience navigating the loan process together with the intricacies of fulfilling requirements of your contract.  We’re here to help with your mortgage needs whether your appraised value comes in high, low or right on the money.


Thing of value, 



Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 


Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.


Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283


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Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Nice, clear explanation Rob that will help a lot of buyers understand. Rachael Kendall do you have friends who could benefit from Rob's post?

Oct 03, 2019 08:15 AM #1
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Thanks for this explanation. I will bookmark to show to clients! I understand it, and have explained to buyers. Your explanation is clearer than anything I can say. My problem with appraisals is how they vary so much for similar properties. Without going into too much detail, I sold two condos in the same complex three months apart. The appraisals cane back $22,000 apart. That's a big difference on units selling for $220k to $250k range. There is not an agent in our market that would not tell you that the cheaper one is more valuable than the higher one. Any thoughts on this would be appreciated.  The only thing in the buying process that gives me more heartburn than the appraisal, is the inspection!

Oct 03, 2019 08:27 AM #2
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Great advice, Rob. I just did a rebuttal on an appraisal that came in short $2,000 for a loan with more than 20% down... it took two rounds, but we got that appraisal value up.

Oct 04, 2019 01:16 AM #3
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Carol Williams good morning, Carol... this process is not well understood by many agents, much less their clients. I'm recommending for second chance Saturday.

Oct 04, 2019 01:17 AM #4
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Rob Spinosa - this is a good handling of what happens in the process.  Thanks for sharing.

Oct 05, 2019 03:34 AM #5
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

There are options when the appraisal comes in low. This is a useful overview for those who might have questions!

Oct 05, 2019 05:48 AM #6
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Rob - thanks to you and to Carol Williams .  Because of you and her SCS Second Chance Saturday post where she highlighted this post I was reminded I saw this title on the blog roll.   I came back to read it and learned the term "value fish".  

Oct 05, 2019 06:44 AM #7
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Rob:

Great education here in appraisals and what can be done if the appraisal is low.


Oct 05, 2019 07:18 AM #8
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Hi Rob, thanks for an easy-to-read explanation about low appraisals.  Funny, some buyers do ask if they get some special deal if a house appraises high. Yes, instant equity. :) 

Oct 05, 2019 07:51 AM #9
Patricia Feager, MBA, CRS, GRI,MRP
Selling Homes Changing Lives

Rob Spinosa - Thank goodness for people like you who can explain the appraisal process so succinctly. Money is personal and it takes someone with knowledge and expertise to explain it so that feathers don't get ruffled. Education is key and you hold the key to knowledge in this department.


Oct 07, 2019 04:25 PM #10
Mimi Foster
Falcon Property Solutions - Colorado Springs, CO
Voted Colorado Springs Best Realtor

It seems insane to me that when you ask for a reconsideration of value they send out the same appraiser! Of course they're not going to change it! 

Had one recently under contract at $435k. Appraisal came in at $385k, which was absolutely absurd. We changed lenders because it was SO absurd, and as fate would have it, it was assigned to the same appraiser who brought it in at $385! Seller put it back on the market at $485 (there were lots of offers) and sold it for list price. 

Great post.

Oct 20, 2019 11:57 AM #17
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Rob Spinosa

Vice President of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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