Appraisal Came In Low? Your Options as an Investor
A low appraisal shrinks the loan, not your options. Here's how investors respond, from renegotiating to restructuring the deal.
Short answer
When an appraisal comes in low, the loan is usually sized on the lower value. Your options are to renegotiate the price, bring more cash, request a reconsideration of value with better comparables, restructure the loan, or use your contract's contingencies to walk away. The right move depends on how far apart the numbers are.
Key points
- The loan usually follows the lower value.
- Renegotiate, bring cash or challenge with comps.
- Check your contract's appraisal contingency.
Why it matters
On a purchase, lenders typically use the lower of the price and the appraised value. A lower value means a smaller loan, so the difference has to come from somewhere.
Deal sheet: 75% loan-to-value purchase, illustrative
| Amount | |
|---|---|
| Purchase price | $400,000 |
| Appraised value | $380,000 |
| Loan at 75% of the price | $300,000 |
| Loan at 75% of the appraisal | $285,000 |
| Extra cash needed | $15,000 |
Your five options
- Renegotiate. Share the appraisal with the seller and ask for a lower price.
- Bring more cash. Cover the gap if the deal still works at your all-in cost.
- Request a reconsideration of value. Submit stronger, recent comparables through your lender; see after-repair value.
- Restructure. Different leverage, a different program or a seller credit can close the gap.
- Walk away. If your contract has an appraisal contingency, use it rather than overpay.
Ready to start? Send your scenario and a KREC loan advisor will walk you through the next step. Talk to an advisor
On a refinance
A low value shrinks your cash-out or raises your loan-to-value. You can challenge it, wait for more rent history or improvements, or take a smaller loan; see cash-out refinancing on a rental.
Frequently asked questions
What happens if an appraisal comes in low on an investment property?
The loan is usually sized on the lower value, so you'll need to renegotiate, bring more cash, challenge the value, restructure the loan or walk away.
Can I dispute a low appraisal?
You can usually request a reconsideration of value through your lender with stronger comparable sales. It doesn't guarantee a change.
Should I bring cash to cover an appraisal gap?
Only if the deal still works at your total cost. Run the numbers at the appraised value before you decide.
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