What happens if my Colorado Springs home doesn't appraise for the contract price?

If a financed buyer's appraisal comes in below the contract price, the deal doesn't automatically end, but something has to change. First, you can ask the lender to reconsider the value, using the comparable sales that supported your price; VA, FHA, and conventional loans each have a formal process for this. If the value stays low, you and the buyer decide together: you can lower the price, the buyer can bring cash to cover the gap, you can meet in the middle, or the contract can end. The best protection starts before you list, with a price you can support.

Preparation starts with pricing

An appraisal is a risk to plan for from the beginning. That's why the data behind your list price matters so much. When I can show exactly why a home is priced where it is, with the comparable sales and adjustments behind it, we're prepared if an appraisal comes in low, whatever loan the buyer is using. (See how to price your home.)

In my experience, low appraisals don't happen often, because we do the research ahead of time. When I represent a buyer, I do the same research, so we don't make an offer above what the home is worth. When an appraisal does come in low, that preparation is what gives you options.

A few steps help before the appraiser ever arrives:

• Keep your pricing rationale: the comparable sales and why each one fits.
• List the improvements: updates, their dates, and what they cost, so nothing is missed.
• Have it ready for the appraiser: your agent can offer the appraiser comparable sales and a list of improvements. Appraisers make their own independent judgment, and no one can pressure them toward a number.

Step 1: Ask the lender to reconsider the value

If the value comes in low, the first step is usually a reconsideration of value, a formal request, through the buyer's lender, for the appraiser to review the report.

• What helps: recent comparable sales the appraiser didn't use, errors in the report (such as wrong square footage, bedroom count, or missing upgrades), and a clear explanation of why your comparables are a better fit.
• VA loans: VA's Tidewater process can give the agents an early warning when the value is likely to come in below the price, with a short window to submit more sales before the report is finished. A reconsideration can also be requested after the report.
• FHA and conventional loans: since 2024, FHA and conventional loans sold to Fannie Mae and Freddie Mac have standardized processes for a buyer-requested reconsideration of value, generally one request per appraisal, supported by alternative comparable sales.

In a military community like Colorado Springs, some sellers worry about VA offers because of the appraisal. VA's process for questioning a low value is well established, and a VA offer can be a very strong one. Each loan type has its own formal process, and being prepared matters more than which loan the buyer uses.

Step 2: If the value stays low, decide together

If the lender doesn't accept the comparables, it's time for a candid conversation about the options:

One question to ask honestly: is there something truly unique about the home that would keep this buyer committed, or that another buyer would pay for? If so, holding firm may make sense. If not, a price adjustment may be the faster path.

Colorado Springs and Colorado specifics

• The appraisal deadline in your contract: Colorado's standard purchase contract sets deadlines for the buyer to object to a low appraisal and for both sides to resolve it. If those deadlines pass without an agreement, the contract can end. Keeping track of them keeps your options open.
• VA and FHA protect the buyer's earnest money: VA and FHA loans require contract language that lets the buyer walk away without losing earnest money if the appraisal comes in below the price, unless the buyer chooses to go forward anyway.
• An appraisal can follow the home: an FHA or VA appraisal generally stays valid for a period of time and can be used for another buyer with the same loan type. If a contract ends over a low FHA or VA value, that value may affect your next buyer's loan, too.
• Higher-priced homes: with jumbo loans, there may be more appraisal review, and custom features don't always appraise at what they cost. (See how jumbo loans work and how luxury and custom homes are priced.)
• Cash buyers: a cash buyer doesn't need an appraisal, which is one reason a cash offer carries less risk. (See whether to accept a lower price with better terms.)

What could change the answer

• How big the gap is: a small gap is often easier to bridge than a large one.
• The buyer's cash: a buyer with savings may be able to cover the difference.
• Other interest in your home: if other buyers were interested, a backup offer changes your options. (See what to do with multiple offers.)
• The loan type: each has its own reconsideration process and contract protections.
• Market conditions: in a rising market, recent sales may lag the price; in a slower one, the appraisal may reflect where the market is heading.

When to talk with a professional

A real estate professional can assemble the comparable sales for a reconsideration and lay out your options. The buyer's lender handles the reconsideration request itself. A real estate attorney can help if you and the buyer disagree about the contract's appraisal terms or deadlines.

Sources

• U.S. Department of Housing and Urban Development, Mortgagee Letter 2024-07, Appraisal Review and Reconsideration of Value Updates: https://www.hud.gov/sites/dfiles/OCHCO/documents/2024-07hsgml.pdf
• Fannie Mae, Appraiser Update, June 2024 (reconsideration of value requirements): https://singlefamily.fanniemae.com/originating-underwriting/appraisers/appraiser-update-june-2024
• Consumer Finance Monitor, "HUD, Fannie Mae and Freddie Mac Issue Reconsideration of Value Guidance" (May 9, 2024): https://www.consumerfinancemonitor.com/2024/05/09/hud-fannie-mae-and-freddie-mac-issue-reconsideration-of-value-guidance-to-combat-appraisal-bias/
• Newrez, "Tidewater VA Appraisal: Complete Guide to the VA Tidewater Initiative": https://www.newrez.com/blog/military-lending/tidewater-va-appraisal-complete-guide-to-the-va-tidewater-initiative-process-and-outcomes/