By admin1
A low appraisal can throw a wrench into a home sale, creating challenges for buyers, sellers, and lenders alike. The good news is that a low valuation doesn’t always mean the deal is dead. Knowing how to challenge a low appraisal can help you present additional evidence, correct errors, and potentially secure a revised valuation.
In this Redfin guide, we’ll walk through the steps to challenge or appeal a low appraisal, from reviewing the appraisal report to requesting a Reconsideration of Value (ROV). Whether you’re selling a home in Hawthorne, CA or buying a house in Wellington, FL, understanding your options can help you move forward with confidence.
In this article:
What happens when an appraisal comes in low?
Before the appraisal: How to strengthen your case from the start
Step 1: Review the appraisal report for errors or missing information
Step 2: Gather stronger comparable sales and supporting documentation
Step 3: Request a Reconsideration of Value (ROV)
What if the appraisal value doesn’t change?
How to challenge a low appraisal: Key takeaways
FAQs about challenging a low appraisal
What happens when an appraisal comes in low?
A low appraisal occurs when a home’s appraised value is less than the agreed-upon purchase price. Because lenders typically base the loan amount on the appraised value rather than the contract price, a low appraisal can create a gap that must be addressed before the transaction can move forward.
While a low appraisal can delay a transaction, it doesn’t automatically mean the sale will fall through. Understanding your options and acting quickly can help buyers and sellers find a path forward.
When an appraisal comes in low, buyers and sellers generally have several options:
- Request a Reconsideration of Value (ROV): If there are errors in the report or stronger comparable sales available, the borrower can work with their lender to challenge the appraisal.
- Renegotiate the purchase price: The seller may agree to lower the sale price to match or come closer to the appraised value.
- Cover the appraisal gap: The buyer can bring additional cash to closing to make up the difference between the loan amount and the purchase price.
- Meet in the middle: Buyers and sellers may agree to split the difference through a negotiated price adjustment.
- Walk away from the deal: If the contract includes an appraisal or financing contingency, the buyer may be able to terminate the agreement without penalty.
>> Discover: Home Appraisal Tips for Sellers: What Hurts (and Helps) a Home Appraisal?
Before the appraisal: How to strengthen your case from the start
While homeowners can’t control the outcome of an appraisal, they can take steps to ensure the appraiser has accurate and complete information about the property. Being proactive can help highlight upgrades, recent market activity, and comparable sales that support the home’s value.
“We always coach our franchisees that are selling a retail or rehabbed property to be proactive regarding the appraisal process,” encourages Kyle Amerson, franchise owner and development agent at WeBuyUglyHouses. “Leave a packet at the front door for the appraiser, containing the comparable sales (hopefully 3-5) used to support the list/contract price, a list of all features and updates/remodeling that was completed by the seller, and a summary of the number of showings, feedback, and offers (hopefully multiple). Keep the packet simple, if it looks like you are trying too hard to justify your value it might be a red flag.”
>> Read more: How to Prepare for a Home Appraisal (and What You Need to Know)
Step 1: Review the appraisal report for errors or missing information
Before submitting an appeal, carefully review the appraisal report for mistakes or missing details that may have affected the home’s valuation. Even small inaccuracies can influence an appraiser’s opinion of value, making this an important first step in the process.
Pay close attention to the following:
- Incorrect square footage measurements.
- Missing bedrooms, bathrooms, or other living spaces.
- Overlooked renovations, upgrades, or major repairs.
- Errors in the property’s condition or features.
- Comparable sales that are outdated, too far away, or not truly similar to the home.
- Inaccurate information about the neighborhood or local market.
As you review the report, make note of any discrepancies and gather documentation to support your findings. This might include floor plans, permits, receipts for improvements, recent comparable sales, or photographs of upgrades.
If you identify errors or believe the appraiser overlooked important information, those details can become the foundation of a Reconsideration of Value (ROV) request. A fact-based approach supported by evidence is typically more effective than simply arguing that the home’s value should be higher.
Step 2: Gather stronger comparable sales and supporting documentation
If you believe the appraisal undervalued your home, the next step is to build a strong case with relevant comparable sales and supporting evidence to increase your appraisal value. The goal is to demonstrate why the property’s value may be higher than the appraiser’s conclusion using objective market data rather than personal opinions.
When gathering documentation, focus on:
- Comparable sales that are recent and located as close to the property as possible.
- Homes with similar square footage, lot size, age, and condition.
- Evidence of renovations, upgrades, or unique features that add value.
- Documentation that highlights differences between your home and the appraiser’s selected comparables.
- Photos, permits, receipts, or contractor records that support your claims.
“To protect against a low appraisal, the listing agent should always meet the appraiser at the property with a curated pack of localized comparable sales to justify the purchase price,” states J.D. Songstad, realtor at MrWestside Real Estate. “If the valuation still comes in low, your next move is to submit a formal appraisal review through the management company. This appeal requires providing highly relevant comps – ideally within a one-mile radius – along with clear, line-item notes detailing how your property’s size, condition, and features compare. Fighting a low appraisal is challenging, but a precise, data-driven argument is your best shot at saving the deal.”
Step 3: Request a Reconsideration of Value (ROV)
Once you’ve reviewed the appraisal report and gathered supporting evidence, the next step is to formally challenge the valuation through a Reconsideration of Value (ROV). An ROV is a request for the appraiser to review additional information that may have been overlooked or reconsider comparable sales that could support a different valuation.
“If your home appraisal comes in lower than expected, don’t panic. You have the right to request a Reconsideration of Value (ROV) through your mortgage broker or lender,” shares Colin Wellman at Silicon Beach Homes. “Work with your real estate agent to identify the strongest comparable sales that best support your home’s value and provide evidence of any overlooked features or upgrades. If the appraiser’s selected comparables are not the best representation of your property, clearly explain why and submit better-supported alternatives as part of the Reconsideration of Value request.”
The process typically involves working with your lender or mortgage broker to submit:
- Recent comparable sales that better reflect the property’s value.
- Documentation of upgrades, renovations, or unique features.
- Evidence of factual errors in the appraisal report.
- Explanations for why certain comparable sales may be more appropriate than those selected by the appraiser.
What if the appraisal value doesn’t change?
Even after a Reconsideration of Value (ROV), there’s no guarantee that the appraiser will adjust the home’s valuation. If the appraisal remains unchanged, buyers and sellers still have several options for moving forward with the transaction.
“If the value remains unchanged, the seller still has options: the borrower can make up the difference in value with cash and move forward with the purchase at the originally agreed upon price,” says Kyle Amerson at WeBuyUglyHouses. “The seller can agree to a price reduction. The buyer can terminate with their financing contingency, and the seller can go back on market, or accept one of the other offers received.”
Depending on the situation, the parties may choose to:
- Cover the appraisal gap: The buyer brings additional cash to closing to make up the difference between the appraised value and the purchase price.
- Renegotiate the sale price: The seller agrees to lower the price to better align with the appraised value.
- Meet in the middle: The buyer and seller split the difference through a negotiated price adjustment.
- Exercise a contingency: If allowed by the contract, the buyer may be able to walk away without penalty.
- Relist the property: The seller can put the home back on the market and pursue other interested buyers.
>> Check out: What Hurts a Home Appraisal? And 7 Things You Can Do to Fix Them
How to challenge a low appraisal: Key takeaways
A low appraisal can create obstacles during a home sale, but it doesn’t always mean the deal is over. Start by reviewing the appraisal report for errors, overlooked upgrades, or comparable sales that may not accurately reflect your property’s value. Then, work with your real estate agent and lender to gather stronger evidence and submit a Reconsideration of Value (ROV).
While there’s no guarantee the appraised value will change, a well-supported, data-driven appeal can improve your chances. If the appraisal remains unchanged, buyers and sellers may still be able to move forward by renegotiating the price, covering the appraisal gap, or exploring other solutions.
FAQs about challenging a low appraisal
Why do appraisals come in lower than the purchase price?
An appraisal may come in lower than the purchase price when the appraiser finds that recent comparable sales don’t support the agreed-upon price. Other factors, such as changing market conditions, limited comparable homes nearby, or differences in the property’s condition and features, can also impact the final valuation.
Can a seller challenge a low appraisal?
Yes, a seller can help challenge a low appraisal by working with the buyer, lender, and real estate agents to provide additional information that supports the home’s value. While the formal Reconsideration of Value request typically goes through the lender, sellers can provide comparable sales, upgrade details, and other documentation to strengthen the appeal.
>> Discover: How to Contest a Real Estate Appraisal
Does a home appraisal affect how much a buyer can borrow?
Yes. Lenders typically use the appraised value – not the purchase price – to determine the maximum loan amount. If the appraisal comes in lower than expected, the buyer may need to bring more money to closing or renegotiate the terms of the sale.
Can you get a second appraisal if the first one is too low?
In some cases, a second appraisal may be possible, but it depends on the lender, loan type, and circumstances surrounding the original appraisal. Buyers should discuss their options with their lender before ordering another appraisal.
Should you waive an appraisal contingency in a home offer?
Waiving an appraisal contingency can make an offer more competitive, but it also means the buyer may be responsible for covering a larger appraisal gap if the home’s value comes in lower than expected. Buyers should consider their financial situation and risk tolerance before waiving this protection.
>> More questions? Should I Be Waiving the Appraisal Contingency?
