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Appraisal Came In Low? Your Options in the Tri-Valley

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Appraisal Came In Low? Your Options in the Tri-Valley

When an appraisal comes in below the contract price, the lender works from the lower number. Fannie Mae’s Selling Guide says that on a purchase, “the property value is the lower of the sales price or the current appraised value.” The difference, often called the appraisal gap, then has to be closed with cash, a new price or a successful reconsideration of value. Otherwise the deal can end. Rules checked against lender and agency guides on October 8, 2026.

Key Takeaways
– Fannie Mae, Freddie Mac, FHA and VA all size a purchase loan on the lower of the price or the appraised value.
– Your lender must give you a free copy of the appraisal, promptly on completion or three business days before closing, whichever is earlier.
– On Fannie Mae and Freddie Mac loans, you get one borrower-initiated reconsideration of value per appraisal, with up to five alternative comparable sales.
– VA contracts must include an escape clause, and an FHA contract signed before the buyer has the appraised value must add an amendatory clause. Both let the buyer walk away from a low value without losing earnest money.

What happens if the appraisal comes in lower than the offer?

The lender sizes the loan to the appraised value, not to the price you agreed to. Fannie Mae divides the loan amount by the lower of the sales price or the appraised value, and Freddie Mac’s Seller/Servicer Guide uses the lesser of the two as well. HUD’s Handbook 4000.1 bases an FHA loan on the lesser of the price, minus any inducements to purchase, or the property value. VA caps a purchase loan at the lesser of VA’s reasonable value or the price plus up to $6,000 of energy efficiency improvements, with the funding fee added on top, according to the VA Lenders Handbook.

Here’s how that plays out on round, hypothetical numbers. These aren’t Tri-Valley market figures.

Appraisal matches the price Appraisal comes in low
Contract price $900,000 $900,000
Appraised value $900,000 $870,000
Loan at 80% of the value used $720,000 $696,000
Buyer’s cash toward the price $180,000 $204,000

The gap is $30,000. Keeping the same 80% ratio costs the buyer $24,000 more in cash, because the loan shrinks by that much. Keeping the original $720,000 loan instead would push the ratio to about 83%. Fannie Mae’s homebuyer guidance on appraisals warns that after a low appraisal, your lender may not approve the loan or may not lend the full amount requested.

A buyer putting little down has the least room to absorb a gap. If you’re planning around assistance, our California down payment assistance guide covers the programs, and our guide to how much house you can afford in the Tri-Valley walks through the budget side.

Can you get a copy of the appraisal?

Yes, and you don’t pay for the copy. Under Regulation B, 12 CFR 1002.14, a lender must give you a copy of every appraisal on a first-lien home loan “promptly upon completion, or three business days prior to consummation,” whichever is earlier. It has to tell you about that right in writing no later than the third business day after it receives your application.

The lender can’t charge for the copy, though it may charge a reasonable fee to cover the appraisal itself. You can waive the timing and take the copy at or before closing, but the waiver has to be obtained at least three business days before closing. On an FHA loan, the handbook adds that the borrower must receive a copy of the statement of appraised value, form HUD-92800.5B.

Read the report as soon as it arrives. Fannie Mae’s homebuyer guidance notes that the appraiser can only discuss results with the lender, which hired them. So your questions go through your loan officer, not to the appraiser.

Can you challenge a low appraisal?

Yes, through a reconsideration of value, or ROV: a formal request, made through the lender, for the appraiser to weigh evidence the report missed or got wrong. Who can start one, and how, depends on the loan.

Loan Who requests it Limits and timing
Conventional (Fannie Mae or Freddie Mac) You, through your lender One borrower-initiated ROV per appraisal, up to five alternative comparable sales, none after closing
FHA The lender’s underwriter When the appraiser didn’t consider relevant information
VA You, in writing, after VA’s Notice of Value VA staff review within 5 business days, or 20 for a field review

Conventional loans. The Fannie Mae Selling Guide requires lenders to have “policies and procedures in place for a borrower-initiated reconsideration of value,” and to give you a disclosure explaining the process when you receive the appraisal. Your request identifies the unsupported, inaccurate or deficient parts of the report. It can add up to five alternative comparable properties with their data sources, such as the MLS listing number, and explain why they support a different value. The appraiser answers in a revised report with commentary, whatever the outcome. Freddie Mac’s guide sets the same one-per-appraisal and five-comparable limits. These are Fannie Mae and Freddie Mac rules; on any other loan, ask your lender in writing how its own reconsideration process works.

FHA loans. FHA added a borrower-initiated ROV in 2024, then rescinded it on March 19, 2025, in Mortgagee Letter 2025-08. Under the current handbook, the underwriter may request a reconsideration when the appraiser didn’t consider relevant information. If the missing data wasn’t your fault, you can’t be held responsible for the appraiser’s extra fee.

VA loans. VA adds a step before the report is final. Under its Tidewater Procedure, the appraiser must notify the requester when the value looks likely to fall below the price, then allow 2 business days for more sales data, according to Chapter 10 of the VA Lenders Handbook. After VA issues its Notice of Value, the Veteran may request a reconsideration in writing through VA’s Regional Loan Center.

A request works best when it rests on specific sales and specific errors. VA asks for each comparable’s street address, sales price, date of sale and gross living area. Federal valuation independence rules in 12 CFR 1026.42 expressly allow asking an appraiser to consider additional comparable sales or to correct errors. The same rules bar the lender and anyone providing settlement services from pressuring an appraiser toward a number.

What are your options as a buyer?

There are four, and Fannie Mae’s homebuyer guidance lists them:

  1. Negotiate a lower price with the seller.
  2. Submit a reconsideration of value.
  3. Increase your down payment to reduce the loan amount.
  4. Walk away. Depending on your contract, that can cost you your earnest money deposit.

Then there’s the appraisal contingency. The California Association of REALTORS explains in a contingency guide that under its purchase agreements, the buyer may cancel if the property doesn’t appraise at the agreed price, and that contingencies are removed in writing. Deadlines and terms differ from contract to contract. Read your own agreement’s appraisal contingency with your agent before its deadline passes.

FHA and VA loans add their own protection. If an FHA buyer signs the contract before receiving the statement of appraised value, the contract must be amended before closing to add an amendatory clause. It says the buyer isn’t obligated to complete the purchase, or to forfeit earnest money, unless the appraised value is at least the stated amount. Every VA purchase contract must carry an escape clause with the same effect when the price exceeds VA’s reasonable value. Under both clauses, the buyer may still choose to go ahead.

If you’re thinking about bringing more cash, weigh the risk first. The Consumer Financial Protection Bureau calls buying a home for more than its appraised value “very risky” and suggests using the lower appraisal to negotiate the price down. On a VA loan, no down payment is required unless the price exceeds VA’s reasonable value. If you proceed anyway, VA’s quick reference for real estate professionals says the buyer pays the difference at closing.

What can a seller do after a low appraisal?

Start with the report’s facts. Freddie Mac’s guidance for sellers says that if you find a factual error, describe it in a letter and contact the buyer’s lender to ask how errors are fixed. Don’t contact the appraiser directly.

Freddie Mac also lists two options when the value stands: ask the buyer to make up the difference in cash, or lower the price to the appraised value. A price cut keeps the sale on track, but it reduces your proceeds. Splitting the difference is also possible; that’s a negotiation between you and the buyer, not a rule.

It helps to price from recent comparable sales from the start. Our guide to what a Livermore home is worth explains how an appraisal differs from a comparative market analysis. For a current estimate on your own home, request a free home valuation.

The Mony Nop Real Estate Team, Compass, 925.575.1602, works across Livermore, Pleasanton, Dublin, San Ramon and Danville, with 400+ clients served. If an appraisal has come in short on a home you’re buying or selling, get in touch with our team.

Frequently Asked Questions

Can I ask for a second appraisal?

Only through the lender, and only for cause. Freddie Mac’s homebuyer guidance says the lender can formally request a second appraisal report, but only when the original is deemed inaccurate. On a conventional loan, the usual route is the reconsideration of value: one borrower-initiated request per appraisal, with up to five alternative comparable sales.

How long is a home appraisal good for?

It depends on the loan. For a Fannie Mae loan, the home must be appraised within 12 months before the note date, and a report more than four months old needs an update. An FHA appraisal is valid for 180 days from its effective date, and an update can extend that to one year.

Can I file a complaint about an appraiser in California?

Yes. California’s Bureau of Real Estate Appraisers licenses appraisers and investigates complaints, and its website lets you look up a license and file a complaint online. A complaint won’t change your value, though. The bureau says it can’t award damages, enforce contracts or give legal advice, so use the reconsideration process for the value itself.

Do I have to pay for a copy of my appraisal?

No. Regulation B bars lenders from charging you for the copy of an appraisal on a first-lien home loan, though they may charge a reasonable fee for the appraisal itself. You’ll get the copy promptly after it’s completed or three business days before closing, whichever comes first, unless you waive that timing.

About the author

Mony Nop has held a California real estate license since 2007 (DRE# 01813021) and spent 17 years with the Livermore Police Department. The two careers overlapped: he started in real estate part time while still an officer, then moved to real estate full time. He leads the Mony Nop Real Estate Team at Compass.

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