What happens if a Scottsdale home appraises for less than the contract price?

If the buyer is financing the purchase, the lender bases the loan on the lower of the contract price and the appraised value, so the difference has to be settled before the loan can cover the price. The buyer and seller can negotiate the price, the buyer can bring more cash, the buyer can ask the lender to take a second look at the appraisal, or the buyer may be able to cancel if the contract allows it. The Consumer Financial Protection Bureau (CFPB) and Fannie Mae's Selling Guide both describe parts of this, and I've named the source next to each fact.

I'm Jen Keene, a REALTOR® with eXp Luxury in Scottsdale, AZ, and I'm the agent people call at every stage of their life. This comes up for buyers and for sellers, so I've written it for both.

This is general information, not legal or financial advice. Your purchase contract controls what each side can do, so read it, and ask your lender and an attorney about your own situation. I checked each source on November 7, 2026.

An appraisal is a written opinion of what a property is worth. The CFPB describes it as an independent assessment of the home's value, often comparing it to nearby properties, and it says the appraiser's job is to give the lender an estimate of the home's market value. The lender orders it to confirm the home's value before it lends against it. The CFPB also says the lender may charge you for the appraisal.

An appraisal is not the same as the price. The price is what a buyer and a seller agreed to, and the appraised value is one professional's opinion of the home's market value. I wrote about what can lower a home's value in Scottsdale, including how an appraiser compares recent sales.

Because the loan is sized from the lower number. Fannie Mae's Selling Guide says that for a purchase, the loan-to-value ratio is the loan amount divided by the property value, and that the property value is the lower of the sales price or the current appraised value. Chase's mortgage education page says the same thing in plain words: mortgage lenders won't lend more than the home's appraised value.

For a government-backed FHA loan, an archived HUD guide (archived in 2012, so check the current rules with your lender) says that when the sales price is higher than the appraised value, the borrower must pay the amount above the required minimum down payment. That is the part people call the gap. If the contract price is above the appraised value, someone has to cover the difference from somewhere other than the loan.

The CFPB adds a warning for buyers. It says it is very risky to purchase a home for more than its appraised value, and that a lower appraisal suggests you would be paying above the home's market value.

There are four things the sources describe, and which ones are open to you depends on the contract and the lender.

Renegotiate the price. The CFPB says you can often use the lower appraised value to ask the seller to lower the price, since the appraisal is strong evidence the price was too high. Chase lists the same option. The seller doesn't have to agree, and that's a decision for the seller.

Bring more cash. Chase lists a larger down payment to cover the gap between the sale price and the appraised price. If you're buying, work out before you make an offer how much cash you could add if you had to, and ask your lender what a lower value would do to your loan. I go through that in my post on financing a multi-million dollar home in Scottsdale.

Ask for a second look. Chase says to have your agent review the appraisal for errors and request a reevaluation, and it says a second opinion may raise the value but that isn't guaranteed. The next section explains the formal process for that.

Cancel, if the contract allows it. The CFPB says that if the seller won't lower the price you may consider canceling the sale, that canceling may carry costs depending on your purchase contract, and that you should consult an attorney to understand your options. Chase says that with an appraisal contingency you can exit without losing your earnest money deposit. Whether your contract has one, and exactly what it says, is in the contract itself.

It's a request to the appraiser to take another look. The federal agencies that wrote the interagency guidance on the subject (the CFPB, the Federal Reserve Board, the FDIC, the NCUA and the OCC) describe a reconsideration of value as a request to the appraiser to reassess the report based on potential deficiencies or other information that may affect the value, and they note that one can start with a consumer asking a financial institution to reexamine a valuation.

Fannie Mae's Selling Guide sets the rule for loans it buys. It says the lender must have procedures for a borrower-initiated reconsideration of value, that a borrower may appeal when they believe the value is unsupported, may be deficient or reflects prohibited discrimination, that a borrower may submit only one per appraisal, and that once a loan has closed the borrower can no longer submit one. The lender decides what to do with it, and the lender is still responsible for making sure the appraisal and value are reliable and supported.

Not every loan is sold to Fannie Mae, so ask your loan officer how your lender handles it and what it needs from you. If you're the buyer, I'll go through the appraisal with you and look at the recent sales it used, so you know what to ask for.

Yes, on a first-lien home loan. The CFPB says that for a typical first mortgage, you may receive a copy of the appraisals and valuations the lender obtains, ideally no later than three days before closing, and that the copy itself can't be charged to you. The rule behind it is Regulation B, section 1002.14, which says the lender must provide the copies promptly after the appraisal is completed or three business days before closing, whichever is earlier, and that you can waive that timing. It also says the lender must send a written notice of your right to the copy, and that the lender may charge a reasonable fee for its cost of the appraisal but can't charge for the copies.

On a low appraisal, the CFPB's advice is simple. It says lenders are required to give you a copy and that you should ask your lender for it if you haven't received one. Read it for the comparable sales the appraiser used and anything that looks wrong, such as a wrong square footage or a sale that isn't like your home. That's what you'd bring to the lender and to the seller.

Read the sections on the appraisal and the loan, and find out what each side may do if the appraised value comes in below the price, whether there is a contingency for it, and what happens to the earnest money if you cancel. I'm not going to summarize any particular form here, because your signed contract is what controls, and your attorney can tell you how it applies. I wrote about the inspection period in Arizona, which is a separate part of the contract from the appraisal.

The best time to ask is before you sign, not after the appraisal comes back. And for sellers, your agent can tell you what the contract says about your options if the buyer's appraisal is low.

Three questions are enough. How would a lower appraised value change my loan amount? How much cash would I need to close the gap, and how much of that comes from savings I'd set aside for closing? And how does your lender handle a request to reconsider a value, and what does it need from me?

The CFPB says a lower appraisal can also be one of the reasons a Loan Estimate gets revised, so if the numbers change, ask your lender to explain them. I cover how the pieces fit in how financing works when buying a home.

Here's what lowers a home's value in Scottsdale, how financing works when buying a home, and financing a multi-million dollar home in Scottsdale.

If you have an appraisal in front of you and want a second pair of eyes on it, get in touch or call me at (480) 203-6605. For anything that depends on your contract or your loan, your attorney and your lender are the people to ask.