Appraisal Comes In Lower Than Offer: The Four Ways Out

An appraisal that lands $15,000 under a $400,000 contract price leaves a buyer with four ways forward, and on Colorado's standard contract one of them closes on its own if the seller simply says nothing. Most buyers find out which one they are on after the deadline that mattered has already passed, because the appraisal arrives on the lender's schedule while the exit date in the contract keeps counting.

This page is for the buyer holding that report right now. It does not argue about whether the appraiser was right. It sorts out what each of the four routes requires on paper, who has to sign what, and which date ends the route. The four are the ones Veterans Affairs lists in its own Quick Reference for Real Estate Professionals (last modified July 2025): request a reconsideration of value, renegotiate the price to match the appraisal, or pay the difference at closing. The fourth is the one VA does not list because it lives in your contract rather than in the loan: leave.

Sources were read on 16 October 2026: the Texas Third Party Financing Addendum (TREC No. 40-11) and the Texas appraisal addendum (TREC No. 49-1), Colorado's Contract to Buy and Sell Real Estate (Residential), form CBS1, for use on or after 1 January 2026, HUD's model amendatory clause (March 2023), Fannie Mae's Selling Guide, Regulation Z on the eCFR versioner API, and a December 2021 VA Loan Guaranty bulletin. Valuation itself, how the appraiser picks comparables and what the condition ratings mean, is covered in what an appraiser actually checks.

First find the clause, the date, and the document it wants

Every route below runs through a specific paragraph of your contract, and each paragraph names three things: the deadline, the notice, and the proof that has to travel with the notice. Get those three on paper before you call anyone.

On the Texas Third Party Financing Addendum, the TREC No. 40-11 form (effective 3 January 2025 on TREC's contract forms list), low value falls under paragraph 2B, Property Approval. If your lender decides the property does not meet its underwriting requirements, "including but not limited to appraisal," you may terminate "on or before the 3rd day before the Closing Date" by giving the seller two things: notice of termination, and "a copy of a written statement from the lender setting forth the reason(s)" for the decision. Then the sentence that does the damage: if you do not terminate under that paragraph, "Property Approval is deemed to have been obtained." Texas also marks paragraph 2 "Time is of the essence," so a day late is late.

Notice what the Texas clock is tied to. Not the appraisal date, not the date you received the report: the Closing Date. Push closing out by a week in an amendment and the termination window moves with it.

Colorado builds a separate apparatus. Section 6.2.1 of CBS1, headed Conventional/Other, says that if the Appraised Value is less than the Purchase Price, or the Appraisal has not reached you by the Appraisal Deadline, you may act "on or before Appraisal Objection Deadline." Three dates govern it, and they sit in the deadline table at section 3.1 as items 22, 23 and 24: Appraisal Deadline, Appraisal Objection Deadline, Appraisal Resolution Deadline. Read that table before anything else, for one reason. Section 3.2 says that if any deadline is left blank or filled with "N/A" or "Deleted," "such deadline is not applicable and the corresponding provision containing the deadline is deleted." A blank on line 23 is not an open-ended right. It can mean there is no appraisal objection right at all.

California's standard form is published by the state Realtors association rather than the state, so the text is not reproduced here. The Department of Real Estate's Reference Book chapter on contracts describes the usual arrangement: "The buyer typically has 17 days to remove the loan and any appraisal contingencies." Typically is the operative word. Your copy says what it says.

FHA and VA purchases carry a second clause on top of all of this, and it behaves differently. HUD's model amendatory clause (March 2023) provides that "the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise" unless you have received a written statement of appraised value "of not less than" the dollar figure in the clause. Its footnote tells lenders that the actual sales price must be the figure inserted. Texas copies this into paragraph 4 of the 40-11 addendum and adds that the 3-day notice requirement in paragraph 2B does not apply to it. Colorado's deadline table carries a note that, if the FHA or VA box is checked in section 4.5.3, the appraisal deadlines do not apply to FHA-insured or VA-guaranteed loans. So an FHA or VA buyer has an exit that is not tied to the 3rd-day-before-closing cutoff, though leaving it until the closing table invites a fight over the earnest money that nobody needs.

If you signed TREC No. 49-1, the Texas appraisal addendum (used only on loans that are not FHA or VA), read it before choosing. Box 1 waives the paragraph 2B termination right on value entirely. Box 2 waives it only if the appraisal comes in at or above a floor you wrote in. Box 3 adds a separate termination right if the value is below a number you chose, within a number of days you chose. Which box carries a mark decides whether route four still exists. What each box gives away is set out in the guide to waiving contingencies.

Way one: argue the number, without letting the argument eat the deadline

The appraisal is not final just because it disappointed you. For a conventional loan, the route is a borrower-initiated reconsideration of value filed through the lender, limited by Fannie Mae to one per appraisal report and up to five additional comparable sales, and it has to rest on factual errors rather than on the size of the gap. Those requirements are laid out in full in the appraisal guide.

VA has a step that happens before the report is even finished. A VA Loan Guaranty bulletin of 16 December 2021 states that if it appears the value will come in below the sales price, the appraiser will notify the requester before completing the appraisal and "will allow 2 business days for the requester, or parties to the transaction contacted by the requester, to submit any additional sales data that they wish to have considered." VA calls this the Tidewater Procedure, after the Virginia region where it was piloted. After the Notice of Value is issued, the veteran may request reconsideration, and "Within 5 business days" VA staff review the report and the new data. The bulletin points to Chapter 10, Topics 8 and 22, of the VA Lenders Handbook; check the current handbook text before relying on either window, because the bulletin is nearly five years old. VA's July 2025 Quick Reference still describes the step, now called the Tidewater Initiative, as running through the point of contact in the appraisal order, though it does not restate the two-day figure.

Two business days is short. It runs from the appraiser's call, and the call goes to whoever is listed as the point of contact on the appraisal order. If you are buying with a VA loan and nobody has told you who that is, ask your loan officer this week, before the appraiser is in the house.

The hazard with this route is timing, not merit. Nothing in Fannie Mae's process or VA's pauses your contract. A Texas buyer whose Closing Date is the 30th loses the paragraph 2B exit at the end of the 27th, whether or not the reconsideration has come back. In Colorado, the Appraisal Objection Deadline does not wait either. If the review will not land in time, the fix is a signed amendment that moves the date, in Texas on the Amendment to Contract, TREC No. 39-11 (effective 1 July 2026). An email from the listing agent saying "we'll work with you" moves nothing.

Way two: renegotiate the price, and know what silence does in Colorado

Asking the seller to come down is the most common route and the one with the most varied mechanics, because the forms treat the request in opposite ways.

In Colorado, renegotiating is a formal act. Section 6.2.1.2 calls it an Appraisal Objection: a written objection delivered with either a copy of the Appraisal or "written notice from lender that confirms the Appraised Value is less than the Purchase Price (Lender Verification)." Then section 6.2.1.3 sets the consequence. If the seller received the objection and the two of you "have not agreed in writing to a settlement" by the Appraisal Resolution Deadline, the "Contract will terminate on the Appraisal Resolution Deadline, unless Seller receives Buyer's written withdrawal of the Appraisal Objection before such termination."

Read that from the buyer's side. Suppose you object, the seller refuses to move, and you decide you want the house anyway at the full price. Doing nothing does not keep the deal alive. You have to deliver a written withdrawal before the Resolution Deadline, or the contract ends on that date. A buyer who stops answering emails because the seller said no has, under this form, chosen to terminate.

Texas has no objection apparatus for value. A price change after a low appraisal is simply an amendment on TREC No. 39-11, signed by both sides, and meanwhile the paragraph 2B clock keeps running. For VA loans, paragraph 4C of the 40-11 addendum adds a line many buyers never notice: if the VA reasonable value is less than the Sales Price, "Seller may reduce the Sales Price to an amount equal to the VA reasonable value and the sale will be closed at the lower Sales Price with proportionate adjustments to the down payment and the loan amount." That is permission for the seller. It is not a duty.

A lower price changes two other things, and both are easier to settle before signing the amendment than after.

Your seller credit cap shrinks with the appraisal. Fannie Mae's interested party contributions topic, B3-4.1-02 (05/07/2025) sets maximum financing concessions "calculated using the lower of the sales price or appraised value (not the loan amount)." Take a buyer putting 5% down on a $400,000 contract with a $12,000 seller credit already agreed: for a principal residence at a loan-to-value above 90% the cap is 3%, which on $400,000 is exactly $12,000. Then the appraisal comes back at $385,000. The cap is now 3% of $385,000, which is $11,550. The extra $450 is no longer a credit; the same topic says that "Financing concessions that exceed the below limits are considered sales concessions," which are deducted from the price. If you negotiate a price cut and a credit together after a low appraisal, size the credit against the appraised value, not the old price.

The Closing Disclosure changes, but the three-day clock usually does not restart. Under 12 CFR 1026.19(f)(2), read on the eCFR versioner API for 1 October 2026, inaccurate figures require corrected disclosures at or before consummation, and only three changes require a new waiting period: the APR becoming inaccurate under section 1026.22, a change of loan product, or an added prepayment penalty. A smaller loan carrying the same fees can nudge the APR, so ask the lender directly whether the revised loan amount keeps the APR inside tolerance. The three triggers are explained in the three-day rule guide.

Way three: pay the gap, or split it, after doing the arithmetic

Run the cash before you offer to cover anything. In the running example the shortfall is $15,000, but your extra cash at closing is set by one sentence in Fannie Mae's loan-to-value topic, B2-1.2-01 (06/01/2022): for purchase transactions, divide the original loan amount by the property value, and "The property value is the lower of the sales price or the current appraised value."

Work it through for a buyer who planned 10% down on $400,000. The illustration holds the loan-to-value at 90% throughout; your lender's limits and your own loan terms are what actually set the numbers.

Two things fall out of the table. Paying "the gap" costs this buyer $13,500, not $15,000, because 10% of the missing $15,000 was already coming from the down payment. And in a 50/50 split the seller gives up $7,500 while the buyer's cash rises by only $6,000, which is a fact worth having when you are the one proposing the split.

The other way to keep the price is to keep the loan at $360,000, which against a $385,000 value is about 93.5% loan-to-value instead of 90%. Whether that is available, and what it changes, is a lender question with lender-specific answers, and this site does not compare loans. What can be said here is that it is a different loan from the one you applied for, so expect revised disclosures and possibly new underwriting conditions.

For VA buyers the cash has rules attached. Texas 40-11 paragraph 4C says that if you elect to complete the purchase above the VA reasonable value, you pay the excess in cash "from a source which Buyer agrees to disclose to the VA" and which "will not be from borrowed funds except as approved by VA." A gift or a draw on a credit line needs to be cleared with the lender before you promise it to the seller.

If you signed TREC No. 49-1 with box 1 or box 2 checked, you may already have agreed to this route in advance. Both boxes carry the same sentence: "If the lender reduces the amount of the loan due to the opinion of value, the cash portion of Sales Price is increased by the amount the loan is reduced due to the appraisal." On box 1 that is the whole outcome. On box 2 it applies only when the value is at or above your floor, and below the floor the paragraph 2B exit is still yours.

Way four: leave, and leave with the earnest money

Termination is the route buyers treat as the easy one, and it is the one most often lost on a technicality.

In Texas, paragraph 2B needs both pieces: the notice and the lender's written statement of reasons. A text from the loan officer saying the appraisal "came in light" is not a written statement of reasons for the lender's determination. Ask the lender for a letter that says the property did not satisfy its underwriting requirements because of the appraised value, and send it with the notice, before the end of the 3rd day before the Closing Date. Do that and the form says "the earnest money will be refunded to Buyer."

In Colorado, termination under section 6.2.1.1 is a written notice under section 24.1, delivered on or before the Appraisal Objection Deadline. Choose it instead of an objection only if you do not want to negotiate, because once you object, the termination comes from the Resolution Deadline instead, on the seller's silence.

FHA and VA buyers can rest on the amendatory clause, which says you incur no "penalty by forfeiture of earnest money deposits or otherwise" if the appraised value is below the stated price. The HUD model also states the reverse: you have "the privilege and option of proceeding with consummation of the contract without regard to the amount of the appraised valuation." Leaving is your choice, not an automatic result.

Whichever form you are on, the refund is not wired the moment you send notice. The holder of the earnest money usually needs a signed release from both sides, and a seller who thinks your notice was late can decline to sign. The release paperwork, and what happens when nobody signs, are covered in who holds the earnest money and when it is at risk. That is the strongest argument for doing the termination by the book even when you are sure of your rights: a clean notice with the lender's letter attached leaves a seller very little to dispute.

The order to do it in, the week the report arrives

The four routes are not exclusive, and the sequence that keeps all of them open runs roughly like this.

1. The day you get the report, read your contract's appraisal or financing paragraph and write down the deadline as a date and time. Texas: the 3rd day before the Closing Date. Colorado: §3.1 item 23. Check that the line is not blank.
2. The same day, ask the lender in writing for two things: confirmation of the loan amount it will now approve, and, if you might terminate, the written statement of reasons the Texas form requires or the Lender Verification the Colorado form accepts.
3. Within two days, decide whether a reconsideration of value has factual grounds. If it does and the review cannot finish before your deadline, get a signed amendment extending the deadline first.
4. Before you propose numbers to the seller, run the table above with your own down payment, and if a seller credit is in play, recalculate its cap against the appraised value.
5. In Colorado, if you object and the seller refuses, decide before the Resolution Deadline whether to withdraw the objection in writing or let the contract end. No answer is an answer.
6. If you are leaving, send the notice with its required attachment, keep proof of delivery, and start the earnest money release the same day.

The appraisal is the lender's document. The deadline is yours, and the buyers who keep all four routes open are the ones who put that date on a calendar the hour the report arrives.