The quick answer
A low appraisal does not automatically end the purchase, but it changes the financing analysis. The parties may review the report, use an applicable reconsideration-of-value process, renegotiate, adjust credits or financing, bring additional eligible funds, choose another permitted option, or end the contract if its terms allow. The right path depends on the loan, appraisal facts, contract, finances, and deadlines.
Why value affects financing
Lenders generally base collateral-related calculations on the applicable value under the program, not simply the agreed price. If value is below price, the originally planned loan-to-value relationship changes. That can affect loan amount, cash needed, mortgage insurance, or eligibility.
The appraisal is an independent opinion of value for the lender's transaction; it is not a guarantee of resale price and not a home inspection.
Review the report before reacting
The borrower has a right to receive the appraisal. Check the subject characteristics, condition, measurements, location, contract information, and comparable sales for factual errors or significant omitted information.
Disagreement with the number alone is not evidence. A useful concern is specific, supported, and submitted through the lender's process—not direct pressure on the appraiser.
Reconsideration of value
For loans requiring an appraisal, Fannie Mae requires lenders to maintain a borrower-initiated reconsideration-of-value process meeting its standards. Other agencies and lenders have applicable processes too. The lender can explain who may submit information, required format, limits, and timeline.
Relevant information may include corrected facts or stronger comparable sales that meet appraisal standards. An ROV is a review request, not a promise that value will change.
Transaction options
Depending on the contract and program, options can include seller price reduction, buyer paying an additional difference, a negotiated combination, restructuring the loan, revising concessions, or exercising an appraisal or financing provision. Each choice can affect cash, payment, approval, and closing time.
The Realtor or attorney should advise on contract rights and negotiation. The loan officer should model financing effects. Do not assume seller credits can replace a down-payment shortfall dollar for dollar; program limits and allowable uses apply.
Keep the team and deadlines aligned
Identify the appraisal-notice date, financing and appraisal contingencies, ROV timing, lock expiration, and closing date. Confirm every contract change in the proper written form and send it to the lender promptly.
This is general mortgage education, not an interpretation of a specific contract or appraisal. Borrowers need advice from their own qualified professionals.