What To Do When Your Appraisal Comes In Too Low

Most investors will tell you that one of the biggest problems they are facing today is not finding buyers for their properties but  getting the banks to appraise them for what the buyers are willing to pay.  Similar to lenders who were burned during the sub-prime market crash, appraisers have had their feet to the fire by the FDIC and other government review boards for being too liberal with their values during that time.

Home appraisal too low?

The result is that many appraisers today are feeling gun shy – consequently, they’re being very conservative with their home evaluations.  This can kill an otherwise solid real estate deal.  So what do you do when it happens to you?

File an appeal & Check for errors

Ask the lender to reexamine the appraisal for any errors and make the lender aware of any errors you find yourself.  It may be possible that the wrong square footage was used, or the wrong number of bedrooms or baths were counted.  Other common errors include garages being evaluated as carports, or the appraiser missing something like a fenced yard or miscounting the  overall size of the lot. The list goes on and on.

Also look at the comparable sales data the appraiser used and see if it truly matches up with the subject property. Is it very far away?  Is there more than a 20% variance from the subject property?  Are these comparable sales described properly in the report?  It’s quite likely that the appraiser assigned to the property by the lender has little or no knowledge of this particular neighborhood and is going strictly off what he or she finds on the internet.  Make sure everything on the appraisal is 100% accurate.

Ask for a review appraisal

If everything in the report is either accurate or has been corrected and the appraisal still seems too low, then ask the lender to have a second opinion done on the appraisal, also known as a review appraisal.  Evaluating a piece of property is as much an art form as a statistical science.  Three appraisers can look at the same report and come up with three very different values.  Having a fresh set of eyes look at your appraisal may be just what you need to get the value bumped up enough to get your deal closed.

Renegotiate your contract

If an appraisal comes in low on a short sale then use it to your advantage.  Contact the lender and tell them their appraisal/BPO came in low and you are changing your offer on the property accordingly.  This could actually save you tens of thousands of dollars on a short sale purchase.  If you are the seller and an appraisal comes in low then approach your buyer and see if there is a way to restructure the deal.  Maybe they are willing to put down more cash.  Like everything else in life it depends on their needs and their situation.  If they really want the property and have access to the cash to make the deal work for all parties then that’s the best way to go.

Split the Difference

Maybe the buyer doesn’t have all of the cash needed to make up for the low appraisal.  If you can lower your purchase price to meet them in the middle while still maintaining your profits then this could be an easy solution.  Giving up some of your money now may still be better than holding onto the property and all of it’s carrying expenses for several more months until you get another buyer.  And you may still face the same problem with that new buyer.  If you can make a deal happen now, it’s always wise to do so.

Find another lender

Believe it or not there are still many lenders in the market.  If one lender’s appraisers are consistently coming in with low values then shop around and go somewhere else.  While this can get expensive if you are paying for these appraisals up front it is worth trying at least one additional lender if it means getting the deal done.


Image courtesy of Dave Dugdale via Flickr.com


  1. Great advice for this kind of situation. Asking for a review appraisal or getting a second opinion is a common thing to do when you’re told that your appraisal is too low.

  2. I am so glad that you liked my Flickr photo so much that you included it on this page.

    I enjoy when people use my photos that I work hard on, but as I noted on Flickr below each photo I let people use my photos on the condition that they provide me credit to my learningdslrvideo.com site.

    Please add my link when you can.

    • Mike Wheatley says:

      Hi Dave, sorry about that. The image now links to your website when you click on it, hope that’s okay. And yes, it’s a great photo, thanks for sharing!

  3. Interesting. One more option…walk away and find another deal. However, if you truly feel strongly about this deal (and not on an emotional level but strictly based on numbers), then try to exhaust all your negotiating tactics – find a common ground to resolve the issue and get it closed.

  4. I am an appraiser and this advice is good advice. Hoewever, do keep in mind, an appraiser can not take adjustments on a sales grid that are not supported. Sometime a fence or other misc item can be, but sometimes not. We are not going to adjusted every little item. I recently was a little lower and got a rebuttal from the agent who basically made a fool out of himself. Before you call for a second opinion and spend someones money on it, take the time to check comps at least. I would love to see reviews and second opnion appraisals ordered as that would increase my business, however sometimes, it is just a waste of someones money.

    • Dan Doran says:

      Great Idea Bill checking the comps in the area usually 1 mile could help solves things