What is a common consequence of a low appraisal?

A common consequence of a low appraisal is that the buyer may need to pay the difference in cash. When a property is appraised at a value lower than the purchase price, lenders generally base their loan amount on the appraised value rather than the agreed-upon price. This could result in a situation where the buyer needs to come up with additional funds to cover the gap between the appraised value and the purchase price to proceed with the transaction.

When the appraisal is lower than expected, the buyer and seller must negotiate how to address this discrepancy. If the buyer cannot negotiate a lower sales price with the seller or if the seller refuses to make adjustments, the buyer may need to provide the additional cash required to secure the mortgage. This situation highlights the importance of both the appraisal process and how it influences real estate transactions.

While a low appraisal can prompt negotiations about price adjustments, it does not guarantee that the seller must lower their asking price outright, nor does it automatically deny the loan or force the property back on the market. Therefore, the implication that buyers may need to find extra funds is a practical outcome of a low appraisal situation.