For most standard home purchase loans, the lender calculates loan-to-value using the lower of the contract price or the appraised value. When an appraisal comes in below the agreed purchase price, the buyer may need to bring more cash, negotiate with the seller, challenge the appraisal through the proper process, or determine whether the contract allows them to walk away.
A low appraisal does not automatically mean the buyer is no longer approved for a mortgage. It means the lender may need to recalculate the loan using a lower property value. How that affects the transaction depends on the loan program, the buyer's available funds, the purchase contract, and the size of the appraisal gap.
What a Low Appraisal Changes
Loan-to-value, commonly written as LTV, compares the mortgage amount with the value used by the lender. For many purchase mortgages, that value is the lower of the sales price or the appraised value.
If the appraisal is lower than the contract price, the loan may no longer fit the original structure. The lender may need to reduce the loan amount, change the down payment requirement, revisit mortgage insurance, or confirm that the file still meets the applicable underwriting guidelines.
What changed is the value assigned to the property as collateral. The buyer's income, credit, assets, and other qualifications may still be acceptable, but the financing must now be evaluated against the lower value.
Why the Lender Cannot Simply Change the Appraisal
Appraisers must be allowed to develop an independent opinion of value. A loan officer, underwriter, real estate agent, buyer, or seller cannot pressure an appraiser to reach the contract price or another predetermined number.
That does not mean an appraisal can never be questioned. Through the proper review process, a lender may ask the appraiser to correct factual errors, explain or support a conclusion, or consider relevant property information and comparable sales. The appraiser must still decide independently whether that information changes the report.
A lender cannot promise that the value will increase. What the lender can control is how quickly the report is reviewed, how clearly the available options are explained, and how efficiently a supported request is submitted.
Your Four Options After a Low Appraisal
| Option | What It Requires | What to Consider |
|---|---|---|
| Renegotiate the purchase price | The seller must agree to reduce the price | This may close all or part of the gap without requiring the buyer to bring additional cash |
| Cover some or all of the difference | Additional verified funds from an acceptable source | The transaction may continue, but the buyer is paying more than the appraised value |
| Request a reconsideration of value | Specific factual errors, stronger comparable sales, or another supported appraisal concern | An ROV may take additional time and does not guarantee that the value will change |
| Terminate the contract | A contractual right to cancel, proper notice, and compliance with applicable deadlines | Whether earnest money is protected depends on the contract, loan program, and circumstances |
These options can also be combined. For example, a seller may reduce the price while the buyer contributes additional cash to cover the remaining difference. There is no required formula for dividing an appraisal gap.
The purchase contract determines how much flexibility the buyer has. An appraisal contingency may allow the buyer to renegotiate or terminate if the value falls short. An appraisal gap clause may require the buyer to proceed up to a specified amount above the appraised value. A buyer who waived the appraisal contingency may have fewer options.
Review the contract with the appropriate real estate or legal professional before agreeing to cover a gap, issuing a termination notice, or allowing a contingency deadline to pass.
Can You Challenge a Low Appraisal?
A reconsideration of value, commonly called an ROV, is a formal request for the appraisal to be reviewed when the borrower or lender believes the opinion of value may be unsupported, inaccurate, or affected by a material deficiency.
An ROV is not a request to raise the appraisal because the buyer wants the home or needs a higher value to close. It should identify a specific problem with the report and provide information that may support a different conclusion.
Depending on the loan program and investor requirements, useful supporting information may include:
- Incorrect square footage, room count, property condition, or finished-area information
- Closed comparable sales that were available but not considered
- Comparable properties that more closely match the home's location, design, age, size, or condition
- Important renovations or property characteristics that were omitted or described inaccurately
- Questions about adjustments, market boundaries, or another part of the valuation methodology
Active listings can provide market context, but closed and verified sales usually provide stronger evidence of market value. A strong submission identifies each property, provides the relevant sale information, and briefly explains why it is more comparable to the subject property than the sales used in the report.
How the ROV Process Works on Conventional Loans
On many conforming conventional loans subject to Fannie Mae or Freddie Mac requirements, the lender must provide the borrower with information about the ROV process when delivering the appraisal report.
These programs generally permit one borrower-initiated ROV per appraisal report. That does not necessarily prevent a lender from taking another permitted appraisal-review action when material deficiencies remain, but it does mean the borrower's formal request should be complete and focused.
The borrower normally submits the information to the lender rather than contacting the appraiser directly. The lender reviews the request, determines whether it contains sufficient support, and communicates appropriate information to the appraiser while maintaining appraisal independence.
The appraiser may agree that a correction or different comparable changes the value, revise part of the report without changing the value, or explain why the original conclusion remains supported.
FHA Appraisal Reviews Follow Different Rules
FHA appraisal requirements should not be treated as identical to the conventional ROV framework.
In March 2025, the Federal Housing Administration rescinded the standardized borrower-initiated ROV policy changes it had introduced in 2024 and restored its previous appraisal-review policy. FHA borrowers who believe an appraisal contains a material problem should work through their lender to determine which review options are available for the specific file.
A second FHA appraisal also cannot be ordered simply because the first value is lower than expected. FHA requirements limit when another appraisal may be obtained, and the lender must document an acceptable reason under the applicable guidelines.
VA Loans Include the Tidewater Process
VA loans have an additional process that may occur before the appraiser completes the final report. If the appraiser believes the value may come in below the contract price, the appraiser may invoke the Tidewater process and request additional market information through the designated point of contact.
This gives the lender, real estate agent, or other designated contact an opportunity to provide relevant sales data before the final value is issued. Because Tidewater occurs while the appraisal is still being completed, everyone involved should respond promptly and follow the deadline provided for the file.
If the final VA reasonable value still comes in below the contract price, the buyer may be able to request a formal reconsideration of value.
VA purchase contracts also contain an escape clause that provides specific protection when the contract price exceeds the reasonable value established by the VA. Depending on the circumstances, the buyer may negotiate a lower price, contribute additional funds, or exercise the applicable right to exit without forfeiting earnest money.
Changing Lenders May Not Produce a New Appraisal
Switching lenders does not automatically erase a low appraisal or guarantee that a new appraisal can be ordered. FHA and VA loans have program-specific appraisal transfer, validity, case assignment, and second-appraisal requirements. Conventional lenders may also be subject to investor and appraisal-review rules that prevent ordering another report solely to obtain a higher value.
Before changing lenders, ask whether the existing appraisal must be transferred or reused, whether another appraisal would be permitted, and whether changing lenders could affect the financing or closing timeline.
What Your Mortgage Lender Can Do
Your lender plays an important role after a low appraisal, even though the lender cannot dictate the appraiser's conclusion.
The lender can:
- Recalculate the loan using the appraised value
- Explain how the lower value affects the loan amount, down payment, and mortgage insurance
- Review the appraisal for errors, unsupported conclusions, or other deficiencies
- Explain the applicable reconsideration process
- Review the borrower's supporting information before submitting an ROV
- Coordinate the VA Tidewater process when applicable
- Help the buyer understand the financing consequences of each available option
The lender cannot guarantee that an ROV will increase the value, pressure an appraiser to meet the purchase price, or determine whether the buyer has a legal right to terminate the purchase contract.
What to Do During the First Two Days
Start by obtaining and reading the complete appraisal report, not just the final value. Review the property description and comparable-sales grid carefully.
Check the basic property facts, including:
- Gross living area and lot size
- Bedroom and bathroom count
- Finished and unfinished spaces
- Garage, basement, and accessory structures
- Property condition and recent improvements
- Neighborhood or market-area description
Ask your real estate agent to identify closed sales that were available as of the appraisal's effective date and that may be more comparable than the properties used in the report.
Then ask your loan officer these three questions:
- Does the loan still work when recalculated using the appraised value?
- What appraisal-review or ROV process applies to this loan program?
- How much time remains before the appraisal or financing contingency expires?
You should also review the purchase agreement with your real estate agent or attorney so that you understand any appraisal contingency, appraisal gap provision, notice requirement, and deadline.
A Low Appraisal Does Not Automatically End the Purchase
A low appraisal creates a financing and negotiation issue, but it does not automatically kill the transaction. The best response depends on the size of the gap, the strength of the appraisal, the seller's willingness to negotiate, the buyer's available funds, and the protections contained in the purchase contract.
The most important step is to determine quickly what the lower value actually changes. Once the lender recalculates the file and the contract deadlines are understood, the buyer can make a decision based on real options rather than the appraisal number alone.
To understand how the appraisal fits into the rest of the transaction, read our guide to the home-buying process. You can also compare the appraisal and underwriting requirements of different programs in our guide to types of mortgage loans.
How Edge Mortgage USA Helps With a Low Appraisal
When an appraisal comes in low, Edge Mortgage USA reviews how the value affects the financing and explains the available next steps based on the loan program.
We can help review the report for potential errors or unsupported conclusions, recalculate the loan against the appraised value, explain the applicable reconsideration process, and coordinate the VA Tidewater process when appropriate.
We cannot promise that an appraised value will change, but we can keep the review moving and give you the financing information you need while your contractual deadlines are still active.
Reach out through our contact form or start a short application to speak with the Edge Mortgage USA team.
This article is provided for general educational purposes and is not legal, financial, real estate, appraisal, or underwriting advice. Loan requirements, appraisal procedures, and contractual rights vary by loan program, lender, investor, property, and purchase agreement. Consult your loan officer and the appropriate real estate or legal professional about your specific transaction.
