What Happens When Your Home Doesn’t Appraise for the Sale Price?

The home appraisal process is one of the most important steps between accepting an offer and reaching the closing table, but most buyers and sellers don’t even think about it…until there is a problem. When an appraisal comes in lower than the agreed-upon price, it can affect the buyer’s financing and closing timeline. In fact, a 2025 report by the National Association of Realtors shows that 5% of contracts were delayed due to appraisal issues.   

We’ll discuss why appraisal gaps occur, how to approach it if it happens to you, and why it doesn’t necessarily ruin your chances of selling the home.

For a lender to approve a buyer for a mortgage loan, they need to know the home is worth the amount they are lending. To confirm the home’s value, the lender hires a licensed appraiser to evaluate the property. 

First, the appraiser visits the home and inspects it, taking notes on things like:

• Overall condition and maintenance
• Square footage and layout
• Number of bedrooms and bathrooms
• Updates and renovations
• Quality of construction and materials
• Garage, basement, yard, pool, and other features
• Exterior condition and lot characteristics

Next, the appraiser researches recently sold, comparable homes, also known as “comps.” Ideally, the comps are within the same area or a similar neighborhood, have the same number of rooms with close to the square footage, and have similar features, such as a 3-car garage, a finished basement, or an in-ground pool. 

Based on what similar homes have sold for, the appraiser prepares a report explaining how he or she arrived at the estimated market value of the home. Included with the report is information about the appraised property and a list of comparable sales. The lender uses the appraised value to determine if the home is worth what the buyer has asked to borrow.

An appraisal gap happens when the home doesn’t appraise for the sale price agreed upon by the seller and buyer. For example, if your contract is for $350,000 but the appraisal comes in at $330,000, the lender may only approve your buyer for the lower amount. 

If your home appraisal came in low, it could be due to:

• Lower comparable sales — The appraiser may find nearby homes with similar size, condition, and features that recently sold for less than your contract price.
• Limited comparable sales — In a slow market, it may be hard to find comps similar to your home. The appraiser may need to go back several years to find out what similar homes sold for, or expand his search to nearby neighborhoods. These values could be lower than what yours is actually worth because they aren’t comparing apples to apples. This can also happen if the construction, layout, or features of your home are unique. 
• The home has condition issues — Needed repairs, outdated systems, roof problems, or general deferred maintenance can reduce the appraised value.
• The square footage or features differ from public records — Differences in reported living area, bedrooms, bathrooms, or additions can affect the valuation. This is especially true if extensive work has been done on the house over the years.
• The location has drawbacks — Busy roads, nearby commercial properties, flood risk, power lines, or other factors can negatively affect a home’s appraised value.

When an appraisal gap happens, important conversations between the buyer and seller must be held. For instance, the buyer may ask if you are willing to lower the price in order to match what their bank will lend. You might ask the buyer if they have cash to close the gap. Or, you could both negotiate and meet in the middle. 

If you think the appraiser has made a mistake, you may consider challenging the appraisal itself. This is much easier with the help of a realtor. 

An experienced agent can help set the record straight on the value of your home. They can present comps to the appraiser that were missed; highlight omitted improvements such as new flooring or a finished basement; submit public records that prove square footage or features of the home; and point out neighborhood advantages such as parks, a great school district, or transportation options that make your home worth more than a comp two or three miles away. 

If the appraisal value remains low despite challenging it, your agent can help you decide if lowering the price is worth it in order to make the sale. Sometimes it is, but in certain situations, it’s worth holding the price steady in hopes that the next appraiser will recognize a higher value.

When selling your home, the last thing you want is for it to appraise for way under your asking price. A realtor at BHHS Select Properties will help you figure out what your home is worth right from the start, factoring in all of the updates and improvements you’ve made, special features, and school district so you can list it for a realistic price. We know the St. Louis area like the back of our hands and can’t wait to find a buyer that’s a perfect match for your property. Contact us as soon as you’re ready to get started.