The VA Appraisal Came In Low. What Now?

When a VA appraisal comes in under your contract price, you have four options: ask for a Reconsideration of Value, renegotiate the price, pay the difference in cash at closing, or use the VA escape clause to walk away with your earnest money. The escape clause has to be in every VA purchase contract, and it's the reason a low appraisal can't lock you into overpaying.

I'm Dennis Mark Interdonato with The Dennis Mark Group. A low appraisal feels like the deal is falling apart. Usually it isn't. It's a negotiation with new information on the table, and here's how it works on a VA purchase in Monmouth or Ocean County.

Why does a low VA appraisal change the deal?

Because VA caps the loan. VA's entitlement page says the most you can borrow on a property is the appraised value or the purchase price, whichever is lower. VA's own example: you're pre-approved for $450,000, you sign a contract at $400,000, and the home appraises at $375,000. Your loan is capped at $375,000.

That leaves a $25,000 gap, and someone has to close it, or the deal changes.

What is the VA escape clause?

It's a required paragraph in your contract. VA's Buyer's Guide says it must be in the sales contract for every VA-guaranteed loan, your lender makes sure it's there before closing, and VA may not guarantee the loan without it.

In plain terms, the clause says you won't lose your earnest money or be forced to buy if the price is higher than the reasonable value VA sets. It also says you can choose to go ahead anyway. The decision is yours.

One catch: VA says you get your earnest money back, but not what you already spent on the inspection or appraisal. On new construction, upgrades you paid for in advance are often not refundable either.

What is a VA Reconsideration of Value?

It's a request to take a second look. According to VA.gov, your real estate agent gives the lender valid sales data showing the home is worth more, and the lender asks the appraiser to reconsider. The Buyer's Guide adds that VA staff review the appraisal, the new data, and market data in VA's appraisal system.

Can you renegotiate the price after a low VA appraisal?

Yes. VA lists it as an option: ask the seller to lower the price to the appraised value. The Buyer's Guide says the seller can also offer other concessions. Remember that VA caps seller concessions at 4% of the reasonable value, which is covered in the 4% rule for VA loans.

A seller who has a VA buyer under contract also has the same appraisal in front of them. If they relist, the next buyer's appraiser may see the same sales. That's often what moves the price.

Can you pay the difference and still buy?

Yes. VA says you can pay the difference between the appraised value and the price at closing. The Buyer's Guide says that if the ROV and renegotiation don't close the gap, bringing cash is the remaining way to buy the house at that price. Your lender confirms how it's handled on your loan.

I tell people what they need to hear, not what they want to hear. Before you write that check, ask yourself if the house is worth it to you at that number. Sometimes it is. Sometimes the appraisal is telling you something.

What about new construction with no comparable sales?

VA's Buyer's Guide says that on new construction, where there may not be comparable sales, your lender can ask the appraiser to use a cost approach to estimate value along with the sales approach. If you're buying in a new development, ask about it up front.

What should you do the day a low VA appraisal comes in?

1. Read the Notice of Value. Look at the comparable sales the appraiser used and any repair items.
2. Check the contract dates. Know how much time you have before you decide.
3. Talk to your lender about an ROV. If better sales exist, get them to the lender fast.
4. Open the conversation with the seller. Through the agents, with the appraisal in hand.
5. Decide what the house is worth to you. Then choose: renegotiate, pay the gap, or walk away under the escape clause.

How do you lower the chance of a low appraisal?

Price the offer from the sales, not from the list price. Before you offer, I show you what similar homes nearby actually sold for, so you know where an appraiser is likely to land. When the house earns a number above that, we talk about it before you sign, not after.

Start with the appraisal itself: what a VA appraisal checks.

Frequently Asked Questions

How long does a VA Reconsideration of Value take?

VA.gov doesn't publish a set timeline. Ask your lender, and build a few extra days into the closing calendar when an ROV is in play.

Does a Reconsideration of Value work?

It can, when the new sales data is strong. VA staff review it, and the appraiser decides whether the value changes. It isn't guaranteed.

Do I lose my earnest money if the VA appraisal is low?

Not if you use the escape clause. VA says you get your earnest money back, though not money you've already spent on the inspection or appraisal.

Can I still buy the house if it appraises low?

Yes. You can pay the difference at closing, if the seller won't lower the price and the ROV doesn't change the value.

This is general information, not legal, tax or lending advice. Your attorney and lender confirm how the clause and any price change apply to your contract.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. See how I handle military and VA home purchases and sales.

Keep reading

• The free Military Home Guide
• How a New Jersey home's market value is figured
• Find out what your home is worth
• How I help buyers, step by step
• Have a question this didn't answer? Send it to Dennis Mark.