What Happens If a Home Doesn’t Appraise?

If a home doesn’t appraise at the agreed purchase price, it doesn’t automatically kill the deal — but it does require a decision.


An appraisal below the purchase price means the lender will base the loan on the appraised value, not the contract price. Buyers and sellers then have to decide how to bridge that gap, renegotiate, or move on.


Understanding this early helps prevent stress and last-minute surprises.

What an appraisal actually does


An appraisal is an independent estimate of a home’s market value, ordered by the lender as part of the financing process.


The appraisal helps the lender answer one question:


“Does this property support the loan amount being requested?”


It is not ordered for the buyer’s protection and does not guarantee the home is problem-free.


If you want a deeper breakdown of how appraisals differ from inspections, our page on home inspection vs. appraisal explains how the two serve very different roles.

What it means when a home doesn’t appraise


When a home appraises below the purchase price:

  • The lender bases the loan on the lower appraised value
  • The loan amount may be reduced
  • The buyer must decide how to proceed
  • The seller must decide whether to adjust expectations


This creates a value gap between the agreed price and the appraised value.

Common options when an appraisal comes in low


There are several ways buyers and sellers may handle a low appraisal, depending on contract terms and loan type.


Common outcomes include:

  • Price renegotiation
    The seller agrees to reduce the purchase price to match the appraised value.
  • Buyer brings additional funds
    The buyer covers the difference between the appraised value and purchase price out of pocket.
  • Seller concessions or credits
    In some cases,     seller assist may help offset buyer costs, though it does not change the appraised value itself.
  • Combination solutions
    Both parties compromise by adjusting price and terms.
  • Termination under appraisal contingency
    If the contract includes an appraisal contingency, the buyer may have the option to exit.


Each situation is contract-specific.

How loan type affects appraisal outcomes


Loan programs influence how strictly appraisal results are treated.


In Pennsylvania, common considerations include:

  • Conventional loans
     Typically flexible, but still limited by appraised value.
  • FHA, VA, and USDA loans
     May include additional condition or safety requirements tied to the appraisal.
  • Cash purchases
     No lender appraisal is required, though buyers may still choose to order one for value confirmation.


This is why appraisal issues sometimes overlap with repair requests, even after a buyer inspection.

Why appraisals can surprise buyers in Central Pennsylvania


In Central Pennsylvania, appraisal challenges are more common with:

  • Older homes
  • Rural properties
  • Homes with wells or septic systems
  • Unique layouts or outbuildings
  • Properties with deferred maintenance
  • Limited comparable sales


These factors can affect how an appraiser evaluates value, even when a home shows well.

Common buyer misconceptions


Buyers are often surprised to learn that:

  • A strong offer does not guarantee an appraisal at value
  • A good inspection does not control appraised value
  • The seller is not required to lower the price automatically
  • Appraisals protect the lender — not the buyer
  • Market demand and value are not always the same thing


Understanding this early reduces emotional reactions later.

How this fits into the bigger buying process


Appraisal issues usually arise after:

  • Pre-approval
  • Offer acceptance
  • Home inspection



That’s why buyers who understand financing, inspections, and appraisal roles ahead of time tend to navigate the process more confidently.


If you’re earlier in the process, understanding pre-approval and financing expectations first can help avoid surprises.

Final perspective


A low appraisal isn’t a failure — it’s a decision point.


The outcome depends on:

  • contract terms
  • loan type
  • buyer flexibility
  • seller expectations
  • market conditions


Clear expectations make these moments far less stressful.

Disclaimer:
This information is provided for general educational purposes only and is not legal, tax, or financial advice. Real estate transactions, loan programs, and contract terms can vary based on individual circumstances, lender requirements, and market conditions. Buyers and sellers should consult with a licensed real estate professional, lender, attorney, or other qualified professional regarding their specific situation.