“The Short Appraisal” – What It Is and How to Handle It
Let’s talk about something that doesn’t happen all the time, but when it does — it can stop a home purchase in its tracks: the short appraisal.
This happens when the home you’re buying doesn’t appraise for the full purchase price. And if you’re a first-time buyer working with a low down payment (or if you’re “packing” your deal with seller-paid closing costs — which we explain in another section), this is something you really need to understand.
First, What Is an Appraisal?
An appraisal is simply an opinion of value, done by a licensed appraiser on behalf of your lender. And here’s the thing — it’s not a guarantee. If you sent three different appraisers to the same property, you’d likely get three different numbers.
Why? Because every home is unique — and every appraiser interprets value a bit differently, just like every buyer sees value in different features.
What Happens When the Appraisal Comes in Low?
If the home appraises below the agreed-upon sale price, your lender won’t loan you the full amount — because they base the loan on whichever is lower: the sale price or the appraised value.
That’s what we call an “appraisal gap” — and someone has to make up the difference.
Let’s say you’re buying a home for $300,000, but the appraisal comes in at $290,000. Your lender will base the loan on $290K, not $300K.
Now what?
Option 1: Bring Cash to Cover the Gap
If you have the money available, you can pay the $10,000 difference in cash. But for many first-time buyers already tight on funds, this isn’t realistic.
Option 2: Negotiate with the Seller
You can go back to the seller, show them the appraisal, and ask them to reduce the price. They may agree, especially if they don’t want to lose the deal.
Often, there’s a compromise somewhere in the middle. A seller might come down a bit, and you make up the rest in cash — if you’re able.
Option 3: Try to Dispute the Appraisal
In some loan programs, it’s possible to request a reconsideration of value or ask for a second appraisal. Not every lender allows this, and it depends on the loan type, but it’s an option — and your House Karma Broker will guide you through it.
Option 4: Walk Away (and Get Your Money Back)
If your contract includes an appraisal contingency (and it should!), you can cancel the deal if the home doesn’t appraise — and get your earnest money refunded.
Yes, you’ll still be out the appraisal fee (usually $500–$1,000), but that’s much better than moving forward on a home you can’t afford.
Why This Happens More with First-Time Buyers
Appraisal gaps are more common with first-time buyers because:
- You’re often working with low down payments
- You may be packing closing costs into the loan by raising the purchase price
- You may have less wiggle room to make up a shortfall
At House Karma, this is what we specialize in — helping first-time buyers with tight budgets find deals that will appraise well, so we can get you the home and make the financing work.
Plan Ahead: How We Help You Avoid This
Our House Karma Brokers:
- Help you look for homes priced slightly below market, so we know they’ll appraise high enough
- Work with your lender and title company to structure deals that have a good chance of appraising
- Advise you on whether you can safely “pack” your deal without triggering a short appraisal
We’ll also walk you through your options if a short appraisal does happen — and negotiate hard on your behalf to try to save the deal.
Final Warning: It’s Not the End of the World, But It Can Kill a Deal
A short appraisal doesn’t have to kill your dream — but if you’re working with a low down payment and minimal reserves, it can create a serious problem.
That’s why working with an experienced, trained House Karma broker matters.
We know how to spot the risk early, structure the deal right, and help you navigate a tough situation if it comes up.
It’s not always easy — but with the right help, it is possible.
