What happens if an appraisal comes in lower than the purchase price?

When an appraisal comes in lower than the purchase price, the most common outcome is that the buyer must either bring additional cash to cover the difference between the appraisal value and the agreed-upon purchase price or negotiate a new sale price with the seller. This situation arises because lenders generally require that the property be worth at least the amount they are lending; if the appraisal does not support the sale price, lenders may hesitate to finance the mortgage for the originally agreed amount.

This means that if the buyer cannot cover the deficit with cash, they may need to work with the seller to adjust the sale price down to a figure that aligns with the appraised value. This negotiation is essential to move forward with the transaction and obtain mortgage approval. Therefore, the requirement to either bring additional funds or renegotiate highlights the flexibility needed in real estate transactions when appraisals do not meet expectations.