My Los Angeles Home Appraised Low

By Natalie Novarro, REALTOR®
Sotheby’s International Realty – Beverly Hills
Serving the Hollywood Hills • Sunset Strip • Surrounding Los Angeles Neighborhoods

You accepted an offer on your Los Angeles home.

You signed the purchase agreement, opened escrow, and everything seems to be moving toward closing.

Then you get the call:

The appraisal came in below the purchase price.

Maybe you accepted an offer for $2 million and the appraisal came back at $1.9 million.

Now what?

Do you automatically have to reduce your price by $100,000?

Not necessarily.

A low appraisal can create a problem—particularly when the buyer is financing the purchase—but it does not automatically rewrite the purchase price.

What happens next depends on the buyer’s financing, the terms of your purchase agreement, whether an appraisal contingency remains in place, whether the buyer is willing and able to bring in additional cash, and what the buyer and seller ultimately negotiate.

Here’s how I would look at it from a seller’s perspective.

1. Why Does the Appraisal Matter If the Buyer Already Agreed to the Price?

Because the buyer and the lender are looking at the transaction differently.

The buyer agreed to purchase your home for a certain price.

But if the buyer is obtaining a mortgage, the lender is evaluating how much it is willing to lend based in part on the property’s appraised value.

An appraiser typically analyzes the property and comparable sales to develop an opinion of value for the lender.

If the appraisal supports the purchase price, the transaction may continue without an appraisal-related financing issue.

If the appraisal comes in below the purchase price, the lender may not be willing to lend the originally anticipated amount.

That creates what is commonly called an appraisal gap.

2. Does a Low Appraisal Mean I Have to Lower My Price?

No—not automatically.

This is probably the most important thing for a seller to understand.

If you have a signed purchase agreement for $2 million and the appraisal comes in at $1.9 million, the purchase price does not automatically become $1.9 million.

You still have a contract.

What happens next depends on the terms of that contract and the buyer’s ability and obligation to perform.

The buyer may ask you to reduce the price.

You may agree.

You may decline.

The buyer may decide to bring in additional cash.

Or the two sides may negotiate another solution.

If an applicable appraisal or financing contingency remains in place, that can also affect the buyer’s options.

3. Can the Buyer Make Up the Difference in Cash?

Potentially, yes.

Suppose the agreed purchase price is $2 million but the home appraises for $1.9 million.

The buyer may decide that they still believe the home is worth $2 million and contribute additional cash to complete the purchase, subject to their lender’s requirements.

But that doesn’t mean every buyer can—or will—do it.

An additional $100,000 can significantly change the amount of cash a buyer needs for the transaction.

This is why I would want to know very quickly:

Does the buyer still want the house?

Does the buyer have additional funds available?

What does the lender require?

What does our contract say about the appraisal?

Those answers determine what options are realistically on the table.

4. What If the Buyer Has an Appraisal Contingency?

This is where the purchase agreement becomes extremely important.

If the buyer has an applicable appraisal contingency and the property does not appraise at the amount required under the contract, the buyer may have contractual rights that affect whether they are required to continue with the purchase.

The exact language of the agreement, any modifications to the appraisal contingency, deadlines and whether the contingency has been removed all matter.

That does not mean the seller automatically has to reduce the price.

It means the parties need to determine what the contract allows and decide whether they can negotiate a solution.

This is one reason sellers should understand the strength of an offer beyond simply looking at the highest price.

5. What If the Buyer Waived or Removed the Appraisal Contingency?

That can significantly change the negotiation.

If the buyer does not have an appraisal contingency—or has already removed it—the buyer may not have the same contractual ability to cancel solely because the appraisal came in below the purchase price.

But that doesn’t necessarily mean the transaction is guaranteed to close.

For example, if the buyer is obtaining financing, the loan terms and any remaining loan contingency may also be relevant.

This is why I would never make assumptions based solely on hearing, “They waived the appraisal.”

I would review the actual contract, any contingency removals, the buyer’s financing and the lender’s position before deciding what the seller should do next.

6. Should I Lower My Price to the Appraised Value?

Not automatically.

Let’s go back to the $2 million sale with a $1.9 million appraisal.

The buyer may immediately ask:

“Will the seller reduce the price to $1.9 million?”

Before answering, I would want to know much more.

How did we arrive at the $2 million purchase price?

Did we have multiple offers?

Was another buyer close to the accepted price?

How long was the home on the market?

What do the recent comparable sales show?

Has anything changed in the market since we accepted the offer?

How strong is the current buyer?

Could the buyer contribute some or all of the difference?

And perhaps most importantly:

If this buyer doesn’t close, how confident are we that we can sell the property again at or near the current contract price?

The appraisal is important.

But it is not the only piece of information that matters.

7. What If I Had Multiple Offers Above the Appraised Value?

This can be useful context when deciding how aggressively to negotiate.

Suppose your home was listed at $1.8 million.

You received three offers:

$1.9 million.

$1.95 million.

And $2 million.

You accepted $2 million.

Then the appraisal comes in at $1.9 million.

As a seller, I would certainly remember that other buyers were willing to pay above the appraised value.

But I would also be careful not to assume those buyers are still available, still interested, or willing to make the same offers today.

A strong backup position can give a seller more confidence in a negotiation.

But an offer you received several weeks ago is not the same thing as a buyer who is ready to close today.

8. Can We Challenge a Low Appraisal?

Sometimes there may be a basis to request that an appraisal be reconsidered.

For example, there may be concerns about factual errors, omitted or more relevant comparable sales, or other material issues affecting the appraisal analysis.

For certain conventional loans, the borrower may be able to initiate a formal Reconsideration of Value, commonly called an ROV, through the lender.

However, simply disagreeing with the value is not enough.

There should be substantive information supporting the request.

And importantly, communication regarding the appraisal generally goes through the buyer and lender rather than the seller attempting to pressure the appraiser directly.

If I believed an appraisal overlooked important information, I would work with the appropriate parties to identify factual, relevant information that could properly be submitted for review.

9. What If the Appraisal Used Bad Comparables?

This can be particularly frustrating in Los Angeles.

Two homes can be geographically close and still be very different.

In the Hollywood Hills, for example, value can be affected by things such as:

views
lot usability
architectural significance
street location
privacy
condition
quality of renovation
parking
accessibility
hillside location
outdoor space

A property on one street may not necessarily be comparable to a home a few blocks away.

If there are legitimate concerns about the comparables or factual information used in an appraisal, those concerns may be relevant to a reconsideration request.

But again, the goal is not simply to argue that the house is worth more.

The goal is to provide credible information that supports why the appraisal analysis may need another look.

10. Could the Buyer and Seller Meet Somewhere in the Middle?

Yes, negotiation is one possible solution.

Imagine again:

Purchase price: $2,000,000
Appraised value: $1,900,000
Gap: $100,000

The solution doesn’t necessarily have to be either:

Seller reduces the price by $100,000.

Buyer brings in the entire $100,000.

Depending on the contract, financing and the parties’ willingness to proceed, buyer and seller may negotiate.

Perhaps the seller agrees to some reduction and the buyer contributes additional cash.

The right answer depends on the numbers and the strength of the transaction.

11. Before You Reduce the Price, Calculate the Cost of Losing the Deal

This is one of the most important calculations for a seller.

Suppose the buyer asks you to reduce the price by $25,000 to keep the transaction together.

Your first reaction might be:

“Absolutely not.”

But what happens if you say no and the transaction doesn’t close?

You may have to return the property to the market.

You could lose several weeks of marketing time.

Future buyers may ask why the home fell out of escrow.

The market may have changed.

Your carrying costs continue.

And there is no guarantee the next buyer will pay the same price.

None of that means you should automatically give up $25,000.

It means you should compare the cost of the concession with the potential cost and risk of losing the transaction.

That’s a much better way to make the decision.

12. A Low Appraisal Doesn’t Necessarily Mean You Overpriced the Home

This is another important distinction.

An appraisal is an opinion of value prepared for the lender.

The market is made up of actual buyers and sellers.

Sometimes the appraisal and the agreed purchase price match perfectly.

Sometimes they don’t.

A unique architectural home, a highly renovated property, a house with an exceptional view or a property in an area with limited truly comparable sales may be more difficult to evaluate.

That doesn’t mean an appraisal should simply be ignored.

But sellers should understand that appraised value and market price are related concepts—not necessarily identical numbers in every transaction.

13. What If the Buyer Wants to Cancel?

Whether a buyer can cancel because of a low appraisal depends on the purchase agreement, applicable contingencies, contingency removals, deadlines and potentially the buyer’s financing.

This is not something I would guess about.

I would review the contract and the transaction history carefully.

If there is a dispute involving cancellation rights, the buyer’s deposit or whether either party is required to perform, legal advice from a qualified California real estate attorney may be appropriate.

14. How I Would Approach a Low Appraisal as the Seller

I would not panic.

And I would not immediately agree to reduce the price.

First, I would gather the facts.

What did the property appraise for?

Why?

Are there factual errors or questionable comparable sales?

Does the buyer have an appraisal contingency?

What other contingencies remain?

What does the lender require?

Can and will the buyer bring in additional cash?

How strong was the original offer?

Did we have other interested buyers?

What would happen if we put the property back on the market?

Once you know those answers, you can make a much more informed decision about whether to hold firm, challenge the appraisal where appropriate, negotiate with the buyer, or adjust the price.

The goal isn’t to “win” the appraisal negotiation.

The goal is to protect your position while getting the transaction to the best possible outcome.

Frequently Asked Questions

Does a seller have to lower the price if the appraisal comes in low?

No, not automatically. A low appraisal does not by itself change the agreed purchase price. What happens next depends on the purchase agreement, the buyer’s financing, applicable contingencies and what the parties negotiate.

Can the buyer pay more than the appraised value?

Potentially, yes. A buyer may choose to contribute additional cash toward a purchase above the appraised value, subject to the buyer’s finances and lender requirements.

Can a buyer cancel because the appraisal is low?

Potentially. Whether the buyer has a contractual right to cancel depends on the purchase agreement and the status and terms of applicable contingencies.

Can a low appraisal be challenged?

There may be a process for requesting reconsideration when there are legitimate concerns about factual errors, comparable sales or other material aspects of the appraisal. For many conventional loans, the borrower works through the lender to request a Reconsideration of Value.

Can the seller order another appraisal?

A seller can obtain an independent valuation for their own purposes, but that does not mean the buyer’s lender will use it. The lender controls its valuation process and determines what appraisal or review it will accept for the loan.

What happens if the buyer waived the appraisal contingency?

That can change the buyer’s contractual options, but the entire agreement—including any remaining financing contingency—should be reviewed before assuming what either party can or cannot do.

Should I reduce my price to save the deal?

Maybe, but don’t make the decision based solely on the appraisal. Consider the size of the requested reduction, strength of the buyer, other offers or interest, current market conditions, carrying costs and the risk of returning to the market.

Your Home Is in Escrow and the Appraisal Came in Low?

A low appraisal can be stressful, but it doesn’t automatically mean your sale is falling apart—or that you have to immediately reduce your price.

The first step is understanding the appraisal, the buyer’s financing, your contract and the strength of the transaction you already have.

From there, you can decide whether it makes sense to hold your position, negotiate, explore a reconsideration of value or pursue another solution.

I specialize in luxury and architectural homes throughout Los Angeles, with a focus on the Hollywood Hills and Sunset Strip.

If you’re thinking about selling your home and want an experienced agent helping you navigate the transaction from pricing and marketing through inspections, appraisal and escrow, visit the Contact page or call/text 323-719-3360.

I’m always here to help.

About the Author

Natalie Novarro is a real estate agent with Sotheby’s International Realty in Los Angeles, specializing in the Hollywood Hills and Sunset Strip.

With over 20 years of experience and more than $100M in career sales, she works with buyers, sellers, and investors throughout Los Angeles.

For more information or to get in touch, visit the Contact page or call/text 323-719-3360.

This article is for general informational purposes only and is not legal, lending or appraisal advice. Purchase agreements, appraisal and loan contingencies, cancellation rights, deposits and financing requirements depend on the specific contract and circumstances. Sellers and buyers should review their transaction documents with their real estate professional, lender and, when appropriate, a qualified California real estate attorney.

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