The Appraisal Gap: How to Save Your Real Estate Transaction When the Valuation Comes in Low

You have navigated the showings, negotiated the terms, and both parties have signed the contract on a beautiful home in Ridgefield, Portland, or Vancouver. But two weeks into escrow, your lender drops a bombshell: The appraisal came in low.

In today's balanced real estate market, an appraisal gap, where an independent appraiser values the home at less than the agreed upon sales price, can feel like a major roadblock. But a low appraisal does not mean your transaction is dead. Here is how buyers and sellers can navigate the gap together:

The Core Options to Resolve an Appraisal Gap Because a bank will only fund a mortgage loan based on the appraised value (or the purchase price, whichever is lower), the resulting financial deficit must be resolved before closing day:

• The Buyer Brings Cash: The buyer can choose to pay the difference out-of-pocket at closing to make up for the loan deficit.
• The Seller Drops the Price: To keep the deal moving forward smoothly, the seller can lower the contract price to match the appraiser's official number.
• Meet in the Middle: Both parties negotiate to split the difference, with the seller dropping the price slightly and the buyer bringing a smaller cash contribution to the table.
• Contest the Appraisal: Your real estate agent can submit a formal Reconsideration of Value (ROV) to the lender, providing alternative neighborhood comparable sales to prove the original appraisal missed key data.

Frequently Asked Questions

• Can a buyer back out of a contract if the appraisal is low? Yes, provided an appraisal contingency was included in the legally executed contract. The buyer can walk away with their entire earnest money deposit fully refunded.
• Who pays for the home appraisal in Oregon and Washington? The buyer traditionally pays for the appraisal upfront as part of their mortgage application closing costs.
• How long is a home appraisal valid for? For standard conventional and FHA home loans, a completed property appraisal report is generally valid for up to 120 days from the date of the inspection.

Need an expert negotiation team to protect your earnest money or your equity? We know exactly how to manage appraisal gaps safely.

Call us today to start a secure real estate journey!

Call: (503) 300-6614