What Happens When a Home Appraises Below the Contract Price?

The buyer's lender orders an appraisal.

The report comes back at $575,000.

What happens now?

This situation is commonly called a low appraisal or an appraisal gap. It can create a challenge because the buyer and seller have agreed to one price while the lender's appraisal supports a lower value.

But a low appraisal does not automatically mean the seller must reduce the price.

It does not automatically mean the buyer must bring the entire difference to closing.

And it does not automatically terminate the contract.

What happens next depends on the buyer's financing, the appraisal and financing provisions in the purchase agreement, applicable deadlines, the size of the appraisal gap, and what the buyer and seller are willing and able to negotiate.

Here is how a below-contract appraisal generally affects an Atlanta home sale and what buyers and sellers should understand when it happens.

If you're buying or selling a home in Atlanta and need help evaluating pricing, comparable sales, or a transaction involving an appraisal issue, contact The Agency Atlanta Intown.

What Is a Real Estate Appraisal?

In a financed purchase, the lender may require an appraisal to obtain an independent opinion of the property's market value.

The appraisal helps the lender evaluate the property being used as collateral for the mortgage.

An appraiser may consider factors such as:

• Recent comparable sales
• Location
• Property size
• Condition
• Quality
• Lot characteristics
• Renovations
• Views
• Parking
• Market conditions
• Other property-specific features

The resulting appraisal is an opinion of value. It is not necessarily the same thing as the contract price.

Related reading: How Appraisals Work in Atlanta Home Sales

Contract Price and Appraised Value Are Different

The contract price is the amount the buyer and seller negotiated.

The appraised value is the appraiser's opinion of the property's market value for the appraisal assignment.

They frequently agree.

Sometimes they do not.

A buyer may be willing to pay more than an appraiser concludes the property is worth. That does not necessarily mean either party did something wrong.

The difficulty arises when the buyer needs financing based on the property value.

Why Does a Low Appraisal Matter to the Lender?

Mortgage lending is based partly on the relationship between the loan amount and the property's value.

For many mortgage transactions, the lender's loan-to-value calculation is based on the lower of the purchase price or appraised value.

That means a lower appraisal can affect how much money the lender is willing to lend under the buyer's loan program.

A Simple Appraisal Gap Example

Suppose:

• Contract price: $600,000
• Appraised value: $575,000
• Appraisal gap: $25,000

The buyer and seller agreed to $600,000, but the lender now has an appraisal supporting $575,000.

The $25,000 difference does not simply disappear.

The parties have to determine how the transaction will proceed under their contract.

A Low Appraisal Does Not Automatically Change the Contract Price

This is one of the most important things for sellers to understand.

If a property appraises below the purchase price, the purchase price does not automatically become the appraised value.

The seller may agree to reduce the price, but whether the seller is required to do so depends on the agreement.

Likewise, the buyer's rights depend on the specific appraisal contingency and other provisions contained in the contract.

The Contract Determines the Next Step

When an appraisal comes in low, the first step should be to review the purchase agreement and applicable financing exhibits.

Questions may include:

• Does the buyer have an appraisal contingency?
• When does that contingency expire?
• What does the contract require the buyer to do after a low appraisal?
• Does the buyer have an appraisal-gap provision?
• Has the buyer agreed to contribute money above the appraised value?
• Is there a cap on that contribution?
• Is the transaction conventional, FHA, VA, or another financing type?
• Has the buyer waived appraisal protection?

The answers can substantially change the parties' options.

How an Appraisal Contingency Can Protect a Buyer

An appraisal contingency can give a buyer contractual rights if the property does not appraise at the required value, provided the buyer complies with the terms and deadlines of the contingency.

Depending on the contract, the buyer may have the ability to request a reduction in the purchase price and potentially terminate if the parties cannot reach an agreement.

That does not mean the seller automatically owes the buyer a price reduction.

Georgia Contracts Can Have Specific Appraisal Procedures

Georgia real estate contracts and financing exhibits can contain detailed procedures governing appraisal issues.

For example, depending on the GAR form and terms used in a transaction, a buyer with applicable appraisal protection may have a specified period to submit a request for a purchase-price reduction supported by the appraisal.

The seller may then have contractual options to accept, reject, or negotiate the proposed change.

Because deadlines and rights can vary by form and transaction, buyers and sellers should rely on the actual signed contract rather than general rules they may have heard elsewhere.

What Are the Main Options After a Low Appraisal?

Although the contract controls, a low appraisal commonly leads to several possible outcomes:

1. The seller reduces the purchase price.
2. The buyer contributes additional cash.
3. The buyer and seller split the difference.
4. The appraisal is challenged through the lender.
5. The parties restructure other transaction terms.
6. The transaction terminates if the contract permits it.

Let's look at each possibility.

Option 1: The Seller Reduces the Price

The simplest solution may be for the seller to reduce the purchase price to the appraised value.

Using our example:

• Original contract price: $600,000
• Appraised value: $575,000
• New negotiated price: $575,000

This eliminates the appraisal gap.

But the seller is not necessarily required to accept this outcome.

The seller may believe the contract price is supported by the market and may prefer another solution.

Why Would a Seller Agree to Reduce the Price?

A seller may consider a reduction if:

• The appraisal appears reasonably supported
• The gap is relatively small
• The seller wants to preserve the transaction
• Returning to the market would be disruptive
• Another financed buyer might encounter the same appraisal issue
• The seller's timing is important

The decision should consider both the current transaction and the alternative of returning to the market.

Why Might a Seller Refuse?

A seller may be less willing to reduce the price if:

• Strong comparable sales support the contract price
• The appraisal appears to contain errors
• Relevant comparable sales were omitted
• The property has unusual features that may not have been adequately considered
• The seller has backup interest
• The buyer has agreed to appraisal-gap protection
• The seller has sufficient time to pursue another buyer

A low appraisal is information, but it is not necessarily the final word on what another buyer might pay.

Option 2: The Buyer Brings Additional Cash

A buyer may decide to proceed at the original purchase price by contributing more cash.

For example:

• Contract price: $600,000
• Appraisal: $575,000
• Gap: $25,000

If the financing structure requires it, the buyer may choose to cover some or all of that difference with additional funds.

However, the actual amount of additional cash required should be calculated with the lender.

It is not always as simple as saying the buyer must bring exactly the appraisal gap to closing.

Why the Extra Cash Is Not Always Dollar-for-Dollar

Suppose the buyer originally planned a particular percentage down payment.

When the appraisal changes the lender's value calculation, the buyer's loan structure may also change.

Depending on the loan program and buyer qualifications, the lender may be able to restructure:

• Loan amount
• Down payment
• Loan-to-value ratio
• Mortgage insurance
• Other financing terms

Buyers should therefore ask the lender for a revised cash-to-close calculation rather than assuming the entire appraisal difference must be added to their original down payment.

Option 3: Buyer and Seller Split the Difference

A negotiated compromise is another possibility.

Using the same example:

• Contract price: $600,000
• Appraised value: $575,000
• Gap: $25,000

The parties might agree to a new price of $587,500.

The seller absorbs part of the gap, and the buyer absorbs the rest.

There is nothing inherently special about splitting the difference equally. The parties can negotiate any structure their contract and financing permit.

Option 4: Request a Reconsideration of Value

If the appraisal appears unsupported, inaccurate, or deficient, the buyer may be able to ask the lender about a Reconsideration of Value, commonly called an ROV.

An ROV is a formal process for asking that the appraisal be reconsidered based on substantive information.

It is not simply a request to raise the value because the parties want the transaction to close.

What Could Support a Reconsideration of Value?

Potential concerns might include:

• Incorrect property characteristics
• Incorrect square footage
• Incorrect bedroom or bathroom count
• Missing renovations or improvements
• Factual errors
• Relevant comparable sales that were not considered
• Adjustments that appear unsupported
• Other material deficiencies in the report

The strongest ROV requests are factual and evidence-based.

Simply Disagreeing With the Value Is Not Enough

An appraisal should not be challenged solely because the value is inconvenient.

If the appraiser used appropriate comparable sales, accurately described the property, and reasonably supported the adjustments, the fact that the result is below the contract price does not itself establish that the appraisal is wrong.

The question is whether there is substantive information that may affect the opinion of value.

Who Communicates With the Appraiser?

In a typical financed purchase, communication regarding the appraisal should go through the lender.

Appraiser-independence requirements are designed to protect the valuation process from improper pressure.

Buyers, sellers, and agents should not attempt to pressure an appraiser to reach a particular value.

Instead, relevant factual information or an ROV request should be handled through the lender's established process.

Can the Seller's Agent Provide Comparable Sales?

Before or during the appraisal process, the listing agent may be able to provide factual information about the property and relevant market activity in a manner consistent with appraisal-independence requirements.

This can be especially useful when the property has:

• Significant renovations
• Unusual architecture
• Rare lot characteristics
• Exceptional views
• Parking differences
• Features not obvious from public records

The purpose is to provide accurate information, not to dictate a value.

Option 5: Restructure Other Terms

Sometimes the parties can preserve the transaction by looking beyond the headline purchase price.

Depending on the financing and contract, negotiations may involve other economic terms.

For example, the parties might reconsider:

• Seller concessions
• Closing-cost contributions
• Repair credits
• Personal property
• Other negotiated financial terms

Any changes should be reviewed with the lender because financing guidelines can limit concessions and affect how certain terms are treated.

Option 6: The Transaction Terminates

Sometimes the buyer and seller cannot bridge the gap.

If the buyer has a contractual right to terminate because of the appraisal and properly exercises that right, the transaction may end.

Whether earnest money is returned depends on the contract, the contingency, applicable deadlines, and whether the buyer followed the required procedures.

A low appraisal by itself should not be treated as an automatic right to terminate.

What If There Is No Appraisal Contingency?

This can substantially change the situation.

If the buyer does not have contractual appraisal protection, a low appraisal may not provide the buyer with the same right to demand a price reduction or terminate based solely on value.

The buyer may still attempt to negotiate.

The seller may voluntarily agree.

But the buyer's contractual obligations can be very different from those of a buyer with an active appraisal contingency.

What Is an Appraisal Gap?

An appraisal gap is the difference between the contract price and appraised value.

For example:

• Contract: $750,000
• Appraisal: $725,000
• Appraisal gap: $25,000

During competitive markets, buyers sometimes address this risk in advance by agreeing to appraisal-gap provisions.

What Is Appraisal Gap Coverage?

Appraisal gap coverage generally means the buyer agrees, subject to the exact contract language, to contribute a specified amount above the appraised value if necessary.

For example, a buyer might agree to cover an appraisal shortage up to $20,000.

If a $600,000 contract appraises at $590,000, a $20,000 gap provision could potentially cover the entire $10,000 difference.

If the same property appraises at $560,000, the contractual consequences would depend on the exact language because the $40,000 gap exceeds the $20,000 coverage.

Appraisal Gap Coverage Is Not the Same as Waiving the Appraisal Contingency

These terms should not be used interchangeably.

A buyer might agree to cover a limited amount of an appraisal shortage while retaining protection beyond that amount.

Another buyer might agree to purchase regardless of the appraised value.

Those are materially different commitments.

Read the actual language.

What If the Buyer Has Plenty of Cash?

A buyer's ability to cover the gap does not necessarily mean the buyer will want to do so.

A low appraisal can change how the buyer views the negotiated price.

A buyer may ask:

If an independent appraiser concluded the home is worth less, should I still pay the original price?

That becomes both a financial and negotiating decision.

Paying Above Appraised Value Is Not Automatically a Bad Decision

An appraisal is one opinion of market value at a particular point in time.

A buyer may have legitimate reasons for paying more.

The property might have:

• A rare location
• An unusually desirable lot
• A specific floor plan
• A premium view
• Hard-to-find parking
• Features with few direct comparable sales

The buyer should understand the financial implications and decide whether the property is worth the additional cash to them.

Why Unique Homes Can Be More Difficult to Appraise

Appraisals rely heavily on market evidence.

When a property has many close comparable sales, valuation may be more straightforward.

When it is unusual, the appraiser may need to make larger adjustments or expand the search for comparable properties.

This can occur with:

• Luxury estates
• Historic homes
• Unique architecture
• Very large properties
• Rare lots
• Highly customized residences

Related reading: What Makes a Buckhead Estate Difficult to Price?

Condo Appraisals Have Their Own Challenges

Atlanta condos can present a different valuation environment.

Appraisers may have sales within the same building, which can provide particularly useful comparisons.

But seemingly similar units can have meaningful differences.

These can include:

• Floor level
• View
• Renovation quality
• Floor plan
• Balcony
• Parking
• Storage
• Corner versus interior location
• Condition

Same-Building Sales Can Be Especially Important

Suppose two condos have identical square footage.

One has:

• Two covered side-by-side parking spaces
• High-floor skyline views
• Renovated kitchen and bathrooms

The other has:

• One uncovered parking space
• Lower-floor views
• Original finishes

Looking at price per square foot alone may not adequately capture those differences.

Parking Can Matter in a Condo Appraisal

Parking can be particularly important in Atlanta condominium valuation.

Differences can include:

• One space versus two
• Covered versus uncovered
• Side-by-side versus tandem
• Location within the garage
• Deeded or assigned rights

Related reading: How Parking Spaces Affect Atlanta Condo Values

Views Can Also Be Difficult to Quantify

A Midtown condo overlooking Piedmont Park may command a premium compared with a unit facing another building.

A Buckhead residence with a long-range skyline view may differ substantially from a similar unit on a lower floor.

But the exact value of the view may be difficult to isolate if few comparable units have recently sold.

This is one reason unique condo attributes deserve careful documentation.

Renovations Do Not Always Appraise Dollar-for-Dollar

A homeowner may have spent $150,000 renovating a property.

That does not automatically add $150,000 to appraised market value.

The appraiser is evaluating what the market indicates buyers pay for the resulting property, not simply adding the owner's improvement costs to the prior value.

This distinction can be frustrating for sellers who have invested heavily in their homes.

Cost and Market Value Are Different

A renovation may cost more than buyers are willing to pay for it.

Another improvement may cost relatively little but materially improve buyer demand.

The appraisal is concerned with market value rather than reimbursement of the seller's costs.

What If the Seller Has Multiple Offers?

Multiple offers can support the argument that buyers were willing to pay the contract price.

But multiple offers do not automatically establish appraised value.

The appraiser still evaluates available market evidence.

For the seller, however, strong backup interest can influence the negotiating decision after a low appraisal.

If another qualified buyer is prepared to purchase the home, the seller may be less willing to make a substantial reduction.

What If the Home Sold Over Asking Price?

List price does not determine appraised value.

A property listed at $700,000 and contracted at $750,000 is not automatically worth $750,000 simply because buyers competed for it.

Likewise, a property contracted below asking could still appraise at or above the contract price.

The appraiser analyzes market value independently of the seller's original asking price.

Can a Seller Order Another Appraisal?

A seller could obtain a separate appraisal for informational purposes, but that does not mean the buyer's lender must use it.

The lender controls the appraisal used for its underwriting process.

If there are legitimate concerns with the lender's appraisal, the appropriate path is generally through the lender's review or reconsideration process.

Can the Buyer Simply Order a New Appraisal?

Not necessarily.

The lender determines what valuation documentation it will accept.

Under current Fannie Mae requirements, a lender obtaining another appraisal because of deficiencies must document the reason and select the most reliable appraisal rather than simply choosing whichever appraisal produces the highest value.

A buyer should therefore discuss the issue with the lender rather than independently ordering another report and assuming it will replace the first one.

How Does a Reconsideration of Value Work?

The exact process depends on the lender and loan program.

For Fannie Mae loans requiring an appraisal, lenders must maintain a borrower-initiated ROV process.

A buyer who believes the appraisal is unsupported or contains material deficiencies can ask the lender how to submit the request.

Relevant information might include:

• Specific factual errors
• Supporting public records
• Relevant comparable sales
• Information about renovations
• Information about omitted property features

The process should focus on evidence, not pressure.

Can an Appraisal Be Revised?

Yes, when appropriate.

An appraiser may correct factual errors or revise an opinion when new information materially affects the analysis.

But an ROV does not guarantee a value increase.

The appraiser may review the information and conclude that the original value remains adequately supported.

What Happens If the Appraisal Is Increased?

If the revised appraisal supports the contract price, the appraisal-related financing issue may be resolved, subject to the lender's remaining underwriting requirements.

If the value increases but remains below the contract price, the appraisal gap becomes smaller and the parties may continue negotiating.

What Happens If the Appraisal Does Not Change?

Then the parties return to the available contractual and financial options.

They may:

• Reduce the price
• Have the buyer contribute additional funds
• Negotiate a compromise
• Restructure permissible terms
• Proceed under an existing appraisal-gap agreement
• Terminate if the contract allows it

How Does a Low Appraisal Affect the Seller?

For the seller, the immediate concern is usually whether the transaction will still close at the agreed price.

But the seller should consider several questions before responding:

• How large is the gap?
• Does the appraisal appear well supported?
• Are there factual errors?
• Are better comparable sales available?
• How much additional cash can the buyer contribute?
• Does the contract require any appraisal-gap contribution?
• How strong is the backup buyer interest?
• How costly would returning to market be?
• Could the next financed buyer encounter the same issue?
• How important is the scheduled closing date?

Do Not React to the Appraisal Before Reading It

A seller may understandably be disappointed by a low value.

But the first step should be analysis.

Review:

• The comparable sales
• The adjustments
• The property description
• The stated square footage
• The condition rating
• The renovations
• The parking
• The lot
• The view
• Other important characteristics

Determine whether there is a substantive reason to challenge the report before beginning negotiations.

How Does a Low Appraisal Affect the Buyer?

The buyer should immediately speak with both the lender and real estate agent.

Important questions include:

• How does the appraisal affect my loan amount?
• How much additional cash would I actually need?
• Can the loan structure be adjusted?
• Do I have appraisal protection?
• What deadlines apply?
• Did I agree to appraisal-gap coverage?
• Does the appraisal contain any factual errors?
• Is an ROV appropriate?

Do not assume the financial impact until the lender recalculates the loan.

What About FHA and VA Appraisals?

FHA and VA financing have their own appraisal-related requirements and contractual provisions.

The rights and procedures can differ from a conventional transaction.

Georgia buyers and sellers using FHA or VA financing should review the applicable financing exhibit and lender requirements rather than assuming conventional-loan procedures apply.

What About Cash Buyers?

A cash transaction does not require a mortgage lender to establish collateral value.

However, a cash buyer may still negotiate an appraisal contingency or independently order an appraisal.

If the buyer has contractual appraisal protection, the appraisal can still affect the transaction.

If the buyer waived appraisal protection, the result may have very different consequences.

Some Financed Purchases May Not Require a Traditional Appraisal

Not every mortgage transaction requires a traditional appraisal.

Depending on the property, loan, and underwriting system, a lender may receive an appraisal alternative such as value acceptance.

When that occurs, there may be no traditional appraisal report producing a separate below-contract value.

Buyers should ask their lender what valuation method applies to their loan.

Can a Low Appraisal Delay Closing?

It can.

Potential delays may arise from:

• Reviewing the appraisal
• Submitting an ROV
• Obtaining additional documentation
• Renegotiating the contract
• Revising the loan
• Updating underwriting

If closing is approaching, all parties should pay close attention to contractual deadlines.

Could the Buyer Lose Earnest Money?

Potentially, depending on the contract.

If the buyer has a valid contractual right to terminate based on the appraisal and properly exercises that right within the required timeframe, the earnest-money treatment may differ from a buyer who simply refuses to close without a contractual basis.

This is why buyers should not assume that "the house didn't appraise" automatically means they can walk away and receive their earnest money back.

The signed contract controls.

What If the Appraisal Comes in After the Contingency Expires?

Timing can be critical.

An appraisal contingency generally has deadlines.

If those deadlines pass without the buyer taking the action required by the contract, the buyer may lose some or all of the appraisal-related protection.

Buyers and their agents should track the appraisal timeline early rather than waiting until the contingency is about to expire.

Due Diligence and Appraisal Contingencies Are Different

Georgia buyers may also have a due diligence period.

Due diligence rights and appraisal rights are separate contractual concepts.

Depending on timing and contract language, a buyer may have rights under one provision even if another has expired.

Do not assume the expiration of due diligence automatically means the appraisal no longer matters, or vice versa.

Related reading: Understanding Due Diligence in Georgia Home Purchases

Financing Contingency and Appraisal Contingency Are Also Different

A financing contingency generally addresses the buyer's ability to obtain the specified loan.

An appraisal contingency addresses the property's appraised value under its particular terms.

The two can interact, but they should not be treated as interchangeable.

This distinction can become especially important when a buyer qualifies financially for the mortgage but the property appraises below the contract price.

How Sellers Can Reduce Appraisal Risk Before Listing

No seller can guarantee an appraisal result.

But careful preparation can help ensure that relevant property information is available.

Before listing, consider documenting:

• Major renovations
• Recent improvements
• Roof replacement
• HVAC replacement
• Window replacement
• Kitchen and bathroom renovations
• Structural improvements
• Unique property features

Accurate square footage and property information also matter.

Pricing Strategy Matters

A seller can receive an offer above asking price and still face appraisal risk if recent market evidence does not support the resulting contract price.

This does not mean a seller should reject a strong offer.

It means the seller should evaluate both:

• The price being offered
• The likelihood that the transaction can actually close at that price

Related reading: How Pricing Strategy Impacts Home Sales

The Highest Offer Is Not Always the Strongest Offer

Suppose a seller receives:

• Offer A: $800,000 with substantial appraisal protection
• Offer B: $815,000 with a strong appraisal contingency and limited additional cash

Offer B has the higher headline price.

But the seller should understand the appraisal exposure associated with both offers.

Price is only one part of an offer's financial structure.

Sellers Should Evaluate Appraisal Terms When Comparing Offers

When multiple offers are received, consider:

• Purchase price
• Financing type
• Down payment
• Appraisal contingency
• Appraisal-gap coverage
• Financing contingency
• Due diligence
• Closing timeline
• Other material terms

A well-structured offer may provide more certainty even if another offer initially appears stronger based solely on price.

What Should a Seller Do Immediately After a Low Appraisal?

1. Obtain and review the appraisal if available under the transaction procedures.
2. Confirm the appraised value and exact size of the gap.
3. Review the buyer's appraisal and financing terms.
4. Check all applicable deadlines.
5. Review the comparable sales used by the appraiser.
6. Look for material factual errors or omissions.
7. Determine whether an ROV may be justified.
8. Ask what the buyer's lender says about the revised financing.
9. Evaluate the cost and risk of returning to market.
10. Negotiate based on the complete picture rather than reacting only to the appraisal number.

What Should a Buyer Do Immediately After a Low Appraisal?

1. Talk to the lender.
2. Ask for the revised loan and cash-to-close calculations.
3. Review the appraisal with your real estate agent.
4. Check the contract's appraisal deadline.
5. Confirm any appraisal-gap obligation.
6. Identify factual errors or relevant omitted information.
7. Ask the lender about the ROV process if justified.
8. Determine how much additional cash you are willing and able to contribute.
9. Decide whether to seek a price adjustment.
10. Follow the contract's required procedures and deadlines.

Is a Low Appraisal a Sign That the Buyer Overpaid?

Not necessarily.

It is one piece of evidence that should be taken seriously.

But market value is an opinion supported by market data, and unusual properties can reasonably produce different value conclusions.

The buyer should review:

• Comparable sales
• Current competition
• Property uniqueness
• Market conditions
• How long they expect to own the home
• The amount of additional cash required

Then the buyer can make an informed decision.

Is a Low Appraisal Proof That the Seller Overpriced the Home?

Not necessarily.

A property can receive a legitimate market offer above an appraiser's value conclusion.

But sellers should also avoid dismissing a low appraisal automatically.

If the report uses strong comparable sales and makes reasonable adjustments, it may reveal that the contract price is difficult to support with recent closed-sale data.

Appraisals Are Especially Important When the Market Is Changing

Appraisers primarily rely on market evidence, including closed transactions.

In a market moving quickly in either direction, contract activity and closed-sale evidence may not always align perfectly.

That can create valuation challenges.

Current listings and pending sales may provide context, but closed comparable sales remain important evidence in appraisal analysis.

Do Not Confuse Appraised Value With Future Value

An appraisal estimates value as of a particular effective date.

It does not guarantee what the property will be worth:

• Next year
• Five years from now
• After renovation
• When market conditions change

Buyers should therefore avoid interpreting an appraisal as a prediction of future appreciation.

A Low Appraisal Can Still End With a Successful Closing

A below-contract appraisal can feel like a major setback when it first arrives.

But it does not necessarily mean the transaction is over.

The parties may still have several ways to bridge the difference.

The key is to understand:

• The contract
• The appraisal
• The financing
• The deadlines
• The parties' financial flexibility

Once those pieces are clear, the problem becomes much easier to evaluate.

Final Thoughts

What happens when a home appraises below the contract price?

First, remember what does not happen automatically.

The purchase price does not automatically fall to the appraised value. The seller does not automatically have to reduce the price. The buyer does not automatically have to cover the entire gap. And the contract does not automatically terminate.

Instead, the appraisal creates an issue that has to be evaluated under the specific terms of the transaction.

The seller may reduce the price. The buyer may contribute additional cash. The parties may negotiate a compromise. A legitimate appraisal issue may be addressed through the lender's reconsideration process. Or the transaction may terminate if the contract gives the buyer that right and the required procedures are followed.

For sellers, the decision should include more than the disappointment of receiving a low value. Review the appraisal itself, the strength of the comparable sales, the buyer's contractual obligations, backup interest, your timing, and the likelihood that another financed buyer could encounter the same problem.

For buyers, speak with the lender before assuming how much additional cash will be required. Then review your appraisal contingency, any appraisal-gap agreement, and the quality of the appraisal evidence.

Most importantly, pay attention to deadlines.

Appraisal rights are contractual, and a strong negotiating position can be lost if the required action is not taken on time.

If you're buying or selling a home or condo in Atlanta and an appraisal comes in below the contract price, contact The Agency Atlanta Intown. We can help analyze the comparable sales, review the transaction from a real estate perspective, coordinate with the lender and closing professionals, and help you evaluate the available options.

This article is provided for general informational purposes and is not legal, lending, appraisal, tax, or financial advice. Contractual rights vary according to the agreement and exhibits used in each transaction. Buyers and sellers should review their specific documents and consult their lender, real estate agent, closing attorney, or other appropriate professional when necessary.