You accepted an offer, the inspection went fine, and then the call comes: the appraisal came in below the contract price. Suddenly the buyer’s lender will only lend against the lower number, and everyone is looking at you.
I’m Evan Weissman. I buy houses for cash, so my offers don’t depend on an appraisal, but I talk with plenty of Maryland sellers who are in the middle of a financed deal when this happens. A low appraisal doesn’t automatically kill a sale. It does force a decision, and the options are clearer once you understand what the contract says and what the lender actually needs.
Why a low appraisal matters at all
A buyer using a mortgage borrows based on the lower of the purchase price or the appraised value. If the house is under contract at $400,000 and appraises at $380,000, the lender calculates the loan on $380,000. The buyer would have to bring the $20,000 difference in cash, on top of the down payment they already planned, or the deal has to change.
Cash buyers don’t face this, because there is no lender. That is one reason a cash offer can be lower but still attractive. The certainty is part of what you are being paid for.
Start by reading the contract
What happens next depends on the paperwork. In Maryland, appraisal terms usually show up in one of three ways:
- An appraisal contingency. This lets the buyer cancel, or ask to renegotiate, if the appraisal comes in below a stated amount. The contingency usually sets a deadline and the steps for giving notice.
- An appraisal gap or escalation clause. In competitive markets some buyers agree upfront to cover a shortfall up to a set dollar amount. If your buyer agreed to cover up to $15,000 and the gap is $20,000, they cover $15,000 and you talk about the rest.
- No appraisal contingency. The buyer waived it. They may still be unable to close if they don’t have the extra cash, but the contract gives them less room to walk without consequences, often tied to their deposit.
Your listing agent should walk you through exactly which language you signed, the deadlines, and what happens to the earnest money in each scenario. If anything is unclear, a Maryland real estate attorney can review it.
Your realistic choices
Once you know the contract terms, sellers generally pick from these:
- Lower the price to the appraised value. Simple and quick, and often the fastest way to keep the deal alive. It costs you the full gap.
- Split the difference. You drop part of the gap and the buyer brings cash for the rest. This is very common.
- Ask the buyer to cover the full gap. Possible if they have cash reserves and really want the house, or if they agreed to a gap clause.
- Challenge the appraisal through a reconsideration of value. More on that below.
- Let the buyer walk and remarket. If you think the appraisal is wrong and you have strong interest from other buyers, this can make sense. Keep in mind the next buyer’s appraiser may look at the same comparable sales.
- Look for a cash buyer or a buyer with a larger down payment. If you have a backup offer, this is when it becomes valuable.
Challenging a low number
Buyers can ask their lender for a reconsideration of value, sometimes called an ROV. The lender sends the appraiser additional information and asks them to take another look. It usually works only when there is something concrete for the appraiser to consider, such as:
- Recent comparable sales nearby that the appraiser didn’t use.
- Factual errors, like the wrong square footage, bedroom count, or lot size.
- Upgrades the appraiser missed, like a new roof, HVAC, or a finished basement, with invoices to prove them.
Your agent can help assemble this. Be realistic, though. An appraiser rarely moves much without new evidence, and the process eats days you may not have before the contingency deadline.
Why houses come in low
Understanding the cause helps you decide whether to fight or adjust.
- Fast moving markets. When prices are climbing, the closed sales an appraiser must rely on lag behind what buyers are paying today.
- Few good comparables. Unique houses, rural properties, and homes in small towns with few recent sales are harder to appraise.
- Condition. If the house needs work, the appraiser adjusts for it, and FHA or VA appraisers may also require repairs before the loan can close.
- Price stretching. Sometimes the contract price simply ran ahead of the market, often after a multiple offer bidding war.
Condition-related appraisals are a different problem
When the issue isn’t value but repairs, like peeling paint on an older house, a missing handrail, a roof at the end of its life, or a furnace that doesn’t run, an FHA or VA appraiser may make the loan subject to repairs. Then the question is who fixes what, and how fast. Sellers often find this harder than a pure value gap, because it means hiring contractors under a deadline.
If your house keeps running into repair conditions, it may be a sign that the buyer pool for it is really renovators and cash buyers rather than first time buyers using low down payment loans. My as-is selling page explains how I price those, and when a listing beats a cash offer gives the other side of that comparison.
A worked example
Say you are under contract at $360,000 with a buyer putting 5 percent down, and the appraisal comes back at $345,000. The buyer has no gap clause and doesn’t have $15,000 extra.
- Option A: you drop to $345,000. Your net falls by about $15,000, minus a little less in commission and transfer taxes because the price is lower.
- Option B: you drop to $352,500 and the buyer brings $7,500 more. Each side gives some.
- Option C: you refuse, the buyer cancels under the contingency, and you return to market. You keep the house, pay another month or two of carrying costs, and hope the next appraisal is higher.
There’s no universally right answer, but writing out your net under each option makes the decision less emotional. My net sheet guide shows how to lay it out.
Does a low appraisal cancel my Maryland home sale?
Not automatically. It depends on whether the buyer has an appraisal contingency and what it says. Many deals continue after the buyer and seller renegotiate.
Can I ask for a new appraisal?
The buyer can ask their lender for a reconsideration of value with new comparable sales or corrections. Lenders don’t usually order a second appraisal just because a seller disagrees.
Who pays the difference when an appraisal is low?
It is negotiated. The seller may lower the price, the buyer may bring extra cash, or they split it. If the buyer signed an appraisal gap clause, they agreed to cover part of the shortfall upfront.
Do cash buyers need an appraisal?
No lender is involved, so there’s no lender appraisal. A cash buyer sets their own price based on their analysis of the house.
Talk through your situation
If a low appraisal has your sale in limbo and you want a firm number to compare against, call or text me at (410) 498-7473. I’ll give you a straight cash figure so you can decide with all the options in front of you.