When the appraisal comes in low
A low appraisal does not cancel the contract and it does not change your sales price. It changes how much the buyer's lender will lend against the house, which leaves the buyer short. Who covers that gap is a negotiation, and nothing about it is automatic.
This explains how home selling works in Texas. It is not legal advice and it is not tax advice. Kyle is a Realtor. For advice about your own situation, talk to an attorney or a tax professional.
The call usually comes about three weeks in and it sounds worse than it is. Before anything else, get the frame right.
What a low appraisal actually does
It does not cancel your contract. It does not lower your price. Your contract still says what it says.
What it changes is the loan. A lender lends against value, not against what two people agreed to. If your contract says $700,000 and the appraisal says $675,000, the lender is now working from $675,000. The buyer is $25,000 short somewhere, and the question is who covers it.
That is the whole problem. It is a financing problem wearing a valuation costume.
Why this happens more in Texas
Texas is a non-disclosure state. No government body, including the county appraisal district, can compel anyone to report what a house sold for, and sale prices are not filed into the public record the way they are in most states.
That does not make prices secret. Brokers report them to the MLS under MLS rules. But it does mean an appraiser here is building an opinion out of MLS data and their own research rather than a clean public record, and that leaves more room for a comparable sale to be missed or misread.
It also means seller concessions can distort things. If the house down the street closed at $690,000 but the seller paid $20,000 toward the buyer’s costs, the economics were closer to $670,000. Whether that gets reflected depends on what the appraiser saw.
Your four options
Hold your price and let the buyer bring the difference in cash. Cleanest for you, hardest for them. Works when the buyer has reserves and really wants the house. Does not work when they are already stretched, which describes a lot of buyers right now.
Meet in the middle. The most common outcome. You come down some, they bring some.
Drop to the appraised value. Fastest way to save the deal. Worth considering seriously if your market is slow and relisting means starting over.
Hold firm and accept the risk. Legitimate, and sometimes right. Just be clear-eyed that the buyer may terminate under the financing addendum and you go back on the market with days on market already accumulated.
Before you pick, look at what your specific market does to houses that come back on.
Source: NTREIS Trends, single-family residential. Figures as of July 2026.
In Plano, where homes were selling in 18 days at 97.7 percent of original ask, losing this buyer costs you less. In Prosper, at 49 days and 92.3 percent, a house that comes back on the market tends to keep drifting. The right answer to a $25,000 gap is genuinely different in those two cities.
Ask to see the appraisal first
Before you concede a dollar, ask for a copy. The buyer paid for it and is usually willing to share it, especially if they want the deal.
Then look at the comparable sales. Specifically:
Are they in your subdivision, or did the appraiser reach into a different one? Are they recent? Did they use a sale that closed months ago in a moving market? Did they miss a sale on your street that closed after theirs? Did they adjust properly for square footage, lot, age, updates, or a backing road?
If you find something real, the path is a reconsideration of value through the lender. You cannot call the appraiser yourself. Your agent puts together the specific sales with the reasons they are better comparables, and it goes through the lender’s channel.
It does not always work. It works often enough to be worth the two days, and it costs nothing but effort.
The addendum that settles this in advance
Most sellers do not know this exists, and it is a promulgated TREC form, not something anybody invented.
Form 49-1, Addendum Concerning Right to Terminate Due to Lender’s Appraisal. It can only be used when the Third Party Financing Addendum is attached and the loan is not FHA or VA. Three boxes, one gets checked.
Waiver. The buyer gives up the right to terminate when property approval fails because of the appraised value. And it spells out the mechanic: if the lender reduces the loan because of the opinion of value, the cash portion of the sales price increases by that same amount. In plain terms, the buyer covers the gap.
Partial waiver. Same thing, but only down to a floor. The buyer waives if the opinion of value comes in at a stated dollar figure or higher, and keeps the right to walk below it. This is the version that actually gets signed in real negotiations, because it splits the risk instead of dumping it all on one side.
Additional right to terminate. The opposite direction, favoring the buyer. On top of their normal rights, they can terminate within a set number of days if the appraised value is below a stated figure and they give you a copy of the appraisal.
If you are looking at multiple offers, an offer with the waiver or partial waiver box checked is meaningfully stronger than one without, and that is worth as much as some price difference. Ask about it while you still have negotiating room, which is before you accept.
FHA and VA are different
Form 49-1 is off the table on government loans. The financing addendum handles those directly.
On FHA, the appraised valuation sets the maximum mortgage HUD will insure. The addendum also states plainly that HUD does not warrant the value or the condition of the property.
On VA, there is a provision worth knowing because it gives you a lever nothing else does.
A VA buyer also has the option to proceed regardless of the appraised value or the VA reasonable value. That is their choice, not something you can require.
When the timing matters
The appraisal usually happens after the option period ends, which means it lands when the buyer’s easy exit is already gone. That is better for you than it sounds.
But their financing exit is still open.
To use it they have to give you notice and a written statement from the lender setting out the reasons. If they terminate without both, that is a different conversation, and one worth having with an attorney rather than assuming.
If this happens: the buyer demands you drop to the appraised value or they walk
What is actually true
They may well have the right to walk. That does not mean the demand is your only option, and it does not mean the number in the appraisal is correct.
Your options
What I would do
Do not answer the same day. Ask for the appraisal, take 24 hours, and look at the comparables. Then decide with your own market's numbers in front of you. A buyer who is at the appraisal stage has already spent real money on inspections and an appraisal and usually wants the house more than the first message suggests.
If this happens: the appraisal is low and the buyer has almost no cash
What is actually true
This one is usually not a negotiation about willingness. If the money is not there, it is not there, and pressing harder does not create it.
Your options
What I would do
Take the second appraisal risk seriously. If your house appraised at $675,000 for this buyer, there is a fair chance it appraises near that for the next one, and you will have lost six weeks getting to the same number. That is not a reason to cave immediately. It is a reason not to treat relisting as a clean reset.
The short version
A low appraisal is a gap, not a verdict. Get the report, check the comparables, ask for a reconsideration if there is a real basis, then decide with your own city’s numbers in mind rather than the feeling in the moment.
And the next time you are looking at offers, ask whether form 49-1 is attached. Settling this before you accept is much easier than settling it three weeks in.
Frequently asked questions
No. Nothing happens automatically. The contract price stays the contract price. What changes is the loan amount the lender will approve, which means the buyer has to bring more cash, you have to come down, or you meet somewhere. If nobody moves, the buyer may be able to terminate under Paragraph 2B of the Third Party Financing Addendum.
Only if they agreed to. TREC form 49-1 is the promulgated addendum that handles this in advance. If the buyer signed the waiver box, the cash portion of the sales price increases by whatever the lender cut from the loan. Without that addendum, it is a negotiation after the fact.
Under Paragraph 2B of the Third Party Financing Addendum, property approval covers the appraisal, and the buyer may terminate on or before the third day before the closing date. They have to give notice plus a written statement from the lender.
You can ask the lender for a reconsideration of value. You cannot contact the appraiser directly. It works best when you can point to a specific comparable sale the appraiser missed or misapplied, which happens more in Texas because sale prices are not in the public record.
Paragraph 4C of the Third Party Financing Addendum lets the seller reduce the sales price to the VA reasonable value and close at the lower price, with the down payment and loan amount adjusted proportionally. A VA buyer can also pay the excess in cash from a disclosed source, but not with borrowed money except as VA approves.
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Sources
Questions about your own sale?
Every house is different. If you want this applied to yours, reach out and I will walk you through it.
Contact Kyle