What Happens During a Home Appraisal and What If It Comes In Low?
Your offer was accepted, your loan is moving along, and then your lender orders something called an appraisal. What actually happens next, and what do you do if the number comes back lower than the price you agreed to pay?
Here is the short answer. An appraisal is an independent opinion of value that your lender requires before funding your loan. In the Bay Area it typically costs $500 to $800, takes about a week to ten days from order to report, and most of the time it comes in at or above the contract price. When it comes in low, you have four options: renegotiate the price, challenge the appraisal, bring more cash to closing, or walk away if your contract allows it.
I'm Katrina Carter, a real estate broker and loan officer based in San Leandro, and because I sit on both the real estate side and the lending side of transactions, I see appraisals from both angles. I hear this question from buyers and sellers almost every week, especially in competitive situations where the offer price climbed well past the list price.
1. What an Appraisal Actually Is
An appraisal is not an inspection and it is not a formality. Your lender is loaning hundreds of thousands of dollars against this property, and they need an independent professional to confirm the home is worth what you are paying. The appraiser does not work for you, the seller, or the agent. They are assigned through a management system specifically so no one in the transaction can influence them.
2. What the Appraiser Looks At
The appraiser visits the property, measures it, photographs it, and notes the condition, upgrades, layout, and lot. Then they compare it to recent sales of similar homes nearby, usually within the last three to six months and as close to the property as possible. They make adjustments for differences: an extra bathroom, a bigger lot, a remodeled kitchen, a busy street. The final number is their supported opinion of market value.
A few things matter more than people expect:
- Recent closed sales carry the most weight, not active listings
- Permitted square footage counts; unpermitted additions often do not
- Condition issues like deferred maintenance can pull value down
- A hot market with rising prices can lag in the comps, since closed sales reflect contracts written months earlier
3. The Timeline
Once your loan is in process, the appraisal is usually ordered within the first few days. The appointment happens within a week in most cases, and the report follows a few days after that. If your contract has a 17 day loan contingency, the appraisal is one of the first things I want moving, because everything else in underwriting depends on it.
4. Why Appraisals Come In Low in the East Bay
After 24 years in East Bay real estate, one thing I see consistently is that low appraisals cluster in two situations. The first is a bidding war where the winning offer jumped far above anything that has closed in the neighborhood recently. The comps simply have not caught up. The second is a unique property, a home with an unusual layout, a big lot, or a location where very few similar homes have sold. In both cases the appraiser is working with thin data, and thin data produces conservative numbers.
5. Your Four Options When the Number Comes In Low
Say you offered $950,000 and the appraisal comes in at $920,000. Your lender will base the loan on $920,000, which creates a $30,000 gap. Here is how I walk clients through it:
- Renegotiate. Ask the seller to lower the price to the appraised value or meet somewhere in the middle. Sellers often say yes, because the next buyer's appraiser will likely find the same comps.
- Challenge the appraisal. Your agent and lender can submit a reconsideration of value with better comps the appraiser may have missed. It works sometimes, not always, and it needs real evidence, not frustration.
- Bring the difference in cash. If you have the funds and believe in the home, you cover the gap yourself. This is common in competitive markets.
- Walk away. If you kept your appraisal contingency, you can exit and recover your deposit. If you waived it, this option may not exist, which is exactly why waiving contingencies deserves a careful conversation before you offer.
6. How to Reduce the Risk Before You Ever Offer
Here is how I think about this when I'm working with someone on this exact situation: we look at the comps ourselves before writing the offer. If we are offering above what the recent sales support, we talk about the gap honestly, decide how much cash cushion exists, and structure the contingencies to match. Going in with your eyes open beats being surprised three weeks later.
FAQ
Who pays for the appraisal?
The buyer, in almost all cases. It is paid when the appraisal is ordered or at closing, depending on the lender.
Can the seller see the appraisal?
Not automatically. The report belongs to the buyer and lender, though the value often gets shared during renegotiation.
Does a low appraisal kill the deal?
No. Most low appraisals get resolved through renegotiation or a cash contribution. Deals die when neither side will move.
What if the appraisal comes in high?
Nothing changes with your loan, but congratulations, you have built in equity on day one. The lender uses the lower of price or value.
If you are buying or selling in San Leandro or anywhere in the East Bay and you want someone who can see both the real estate and the lending side of your transaction, reach out. I am happy to walk through the numbers with you before you commit to anything.
Katrina Carter
Broker Associate | Loan Officer
Call or text: 510.288.6002
