CostYou won at $900,000. The bank's appraisal comes back at $850,000 — a $50,000 gap that doesn't disappear just because you already have a signed offer.
$900,000 offer, $850,000 appraisal, 10% down
| Purchase price | $900,000 |
| Appraised value | $850,000 |
| Lender's maximum loan (90% of the lower of the two) | $765,000 |
| Down payment you planned | $90,000 |
| Additional cash now needed to close | $45,000 |
What usually happens
Lenders base your mortgage on the lower of the purchase price and the appraised value — never the higher one. If the appraisal comes in below what you agreed to pay, the lender simply won't finance a loan-to-value ratio calculated against your offer price; it recalculates against the lower appraised value instead. The gap between what the seller expects and what the bank will lend doesn't vanish — it becomes cash you need to come up with, on top of your planned down payment, if you still want to close at the agreed price.
What you can do about it
You generally have four options once an appraisal comes back low, and none of them is automatic:
- Cover the gap in cash — pay the difference between the loan the appraisal supports and what you need, on top of your original down payment.
- Renegotiate the price — ask the seller to reduce the price to match the appraisal, which they may or may not agree to depending on how competitive the market is.
- Order a second appraisal — sometimes possible if you believe the first one used weak comparables, though lenders don't always accept a second opinion.
- Walk away using a financing condition — if your offer included a financing condition and you can't secure enough financing, you may be able to exit the deal, though this depends entirely on how the condition was worded and whether it's still in effect.
What you may have been told
Reality: lenders lend against the appraised value, not the offer price. A low appraisal caps your loan regardless of how strong your income or credit is — it's a property-value constraint, not a borrower-qualification one, and no amount of income can override it.
Who to ask
Talk to your mortgage broker or lender immediately about your specific options and timeline — appraisal gaps often surface close to your financing condition deadline, so speed matters. If you believe the appraisal itself is flawed (wrong comparables, missed upgrades), ask your broker whether a reconsideration or second appraisal is realistic with this specific lender, since policies vary. If you're weighing whether to walk away, have a real estate lawyer review your specific financing condition wording before you do anything — the exact language determines whether you can exit cleanly or risk forfeiting your deposit.
See what a lower loan amount would do to your monthly payment, or check your overall affordability before deciding how to respond.