Los Angeles seller guide
What Happens If the Appraisal Comes in Low in California?
If the appraisal comes in low in California, the buyer's lender measures the loan against the lower appraised value, so the gap is closed by the buyer (extra cash, or a higher loan-to-value ratio if the program allows it), by you with a price reduction, by a successful reconsideration of value, or by a cancellation if the appraisal contingency is still active, which the standard contract typically allows for 17 days (California DRE, Reference Book Chapter 20).
A low appraisal is one of the few moments in escrow when real money changes hands over a number nobody negotiated. In Los Angeles, where comparable sales vary block by block, the report can land well below an accepted offer. Your options depend on contingency timing, loan type, and how much room the buyer has. The sections below cover each path and the math behind it.
The short answer
A low appraisal does not cancel your sale by itself. The buyer's lender measures the loan against the lower appraised value, and the contract decides whether the buyer can still cancel. You can hold your price, send comparable sales for a reconsideration of value, split the gap, cut the price, or offer a credit toward the buyer's closing costs. If the buyer cancels, a cash or back-up buyer may be next.
Price your gap before the appraisal lands
A current value range shows how much room you have to hold, split, or cut if the appraisal comes in below your contract price. Get the range, or call Justin to talk it through.
What does a low appraisal mean for my Los Angeles sale?
A low appraisal means the appraiser's opinion of value for your Los Angeles home is below the price in your accepted contract. The buyer's lender orders the appraisal, not you, and the lender uses it to decide how much it will loan against the property.
Fannie Mae calculates loan-to-value on a purchase by dividing the original loan amount by the lower of the sales price or the current appraised value (Fannie Mae, Selling Guide B2-1.2-01). A lower value with the same loan amount means a higher loan-to-value ratio, so the buyer either brings more cash, borrows the same dollars at that higher ratio if the program allows it (often with mortgage insurance), or asks you to lower the price. Your agreed price does not change on its own, but the financing behind it does.
The Consumer Financial Protection Bureau tells buyers that a lower-than-price appraisal is strong evidence the price was above market value, that they can use it to ask the seller for a lower price, and that they may consider cancelling if the seller refuses (CFPB, My appraisal is less than the sale price). Expect your buyer's agent to repeat that script almost word for word.
Ask the buyer's agent for a copy of the full appraisal before you respond. The comparable sales inside it show exactly where the appraiser disagrees with your price. Unless your contract requires it, the buyer may not have to share the report with you, so ask early and make sharing the full report a condition of any price concession.
Market context matters in Los Angeles County. The county median price for existing single-family homes was $994,670 in September 2026, up 1.2% from September 2025 (C.A.R., September 2026 home sales and price report). Appraisers lean on closed sales, and closed sales can trail the offers being accepted today, so a rising or uneven market can produce a report that lags your contract price.
How does the appraisal contingency in the California RPA work?
The C.A.R. Residential Purchase Agreement (RPA) gives the buyer a loan contingency and an appraisal contingency. California DRE describes the typical default as 17 days for the buyer to remove the loan and appraisal contingencies (California DRE, Reference Book Chapter 20). The parties can change the number of days, so read the fill-ins in your contract.
The 12/18 RPA that C.A.R. posts publicly prints 17 days for the appraisal contingency and 21 days for the loan contingency (C.A.R., RPA 12/18, paragraphs 3I and 3J). That is a 2018 revision, and the gap between the two deadlines depends on your revision and the negotiated fill-ins. Check whether your loan and appraisal deadlines match before relying on the "remove appraisal, keep loan" scenario below.
While the contingency is active, a low appraisal gives the buyer a contractual path to renegotiate or cancel. Once a conventional or cash buyer removes it in writing, the buyer is deemed to have assumed responsibility for that contingency and for any inability to obtain financing (C.A.R., RPA 12/18, paragraph 14F). FHA and VA buyers are different, as the next paragraphs explain.
Read the loan contingency next. Because the 12/18 RPA runs the loan contingency longer than the appraisal contingency, a buyer can remove the appraisal contingency while the loan contingency is still active, then argue the loan failed because of the low value. In that revision, once the appraisal contingency is waived or removed, failure to appraise at the purchase price does not entitle the buyer to cancel under the loan contingency if the buyer is otherwise qualified for the loan (C.A.R., RPA 12/18, paragraph 3J). The current revision is member-only, so ask your listing agent to confirm the paragraph in the revision your contract uses.
Check the loan type on the offer before you assume you have leverage. FHA Handbook 4000.1 says that when the borrower did not receive HUD's appraised-value statement before signing, the sales contract must be amended before closing to include an amendatory clause. The clause says that, notwithstanding any other provision of the contract, the purchaser is not obligated to complete the purchase or forfeit earnest money unless given a written statement of an appraised value not less than the stated amount (FHA, Single Family Housing Policy Handbook 4000.1, Amendatory Clause). The clause also lets the buyer proceed regardless of the appraised value, for example by bringing the difference in cash.
VA loans carry a counterpart. VA's own page quotes its escape clause, which says the purchaser does not forfeit earnest money or have to complete the purchase if the price exceeds VA's reasonable value, and which keeps the buyer's option to proceed anyway; a buyer who proceeds can borrow no more than the lower of the price or the reasonable value (VA, VA Escape Clause). HUD's Handbook calls the same protection the VA Amendatory Clause. Confirm the clause wording with the buyer's lender.
If the clause is in your contract, it is written to apply notwithstanding any other contract provision, so do not assume a Form CR removal moves the low-appraisal risk to an FHA or VA buyer. The C.A.R. RPA calls for a FHA/VA amendatory clause, Form FVAC, when FHA or VA financing is used (C.A.R., RPA 12/18, paragraph 3D).
The FHA Handbook does not require the clause on HUD REO sales, 203(k) mortgages, sales by Fannie Mae, Freddie Mac, VA, USDA or other government sellers, or sales to buyers who will not live in the home, and it requires adding the clause only when the borrower did not receive HUD's value statement before signing (FHA, Handbook 4000.1, Amendatory Clause exceptions). The revision quoted here is dated 08/14/2019, so the buyer's lender can confirm the current wording.
Removal must be in writing, typically on the C.A.R. Contingency Removal form (CR). If the buyer does not remove the contingency on time, you may give a Notice to Buyer to Perform (NBP), which is typically required before cancelling the agreement and escrow (California DRE, Reference Book Chapter 20). In the 12/18 RPA the NBP gives the buyer at least 2 days after delivery (C.A.R., RPA 12/18, paragraph 14E); confirm the period in your revision.
Cancelling after an NBP for a missing contingency removal does not hand you the deposit. If you cancel because the buyer never removed the contingency, the RPA has you authorize the return of the buyer's deposit, less the buyer's fees (C.A.R., RPA 12/18, paragraph 14D).
The buyer's deposit is exposed to a default claim only after the buyer removes contingencies and then fails to close, and an FHA or VA amendatory clause can still apply. If you both initialed the liquidated damages clause, your recovery is limited to the deposit actually paid, up to 3% of the price on an owner-occupied home of up to four units (C.A.R., RPA 12/18, paragraphs 21B and 28).
Without it, the 3% limit is not part of the contract. For a buyer's breach of an agreement to buy real property, Civil Code 3307 treats the detriment as the excess, if any, of the contract amount over the property's value to the seller, plus consequential damages according to proof and interest (CA Civil Code, Section 3307). That is usually measured by how much less the home is worth than the contract price, plus certain costs, so a home still worth the contract price or more can leave little to recover for the price difference. Ask a real estate attorney how it applies to your facts.
Under the RPA, releasing a deposit takes mutual signed instructions from both parties, or a judicial decision or arbitration award, and a party who refuses to sign cancellation instructions when no good faith dispute exists can face a civil penalty of up to $1,000 (C.A.R., RPA 12/18, paragraph 14H). Escrow does not decide who is entitled to the deposit.
| Contingency status | What a low appraisal means | Who decides next |
|---|---|---|
| Active, not yet removed | The buyer may ask for a lower price, negotiate, or cancel under the contract's terms. | Buyer and seller, through their agents and written amendments. |
| Removed in writing on Form CR, conventional or cash buyer | The gap is the buyer's problem to fund or the buyer risks default remedies. | Buyer first. A deposit dispute needs mutual signed instructions, mediation, arbitration, or a court outcome. |
| FHA or VA buyer with the amendatory clause in the contract | The clause lets the buyer walk away without losing the deposit if the appraised value is below the stated price. | Your listing agent, reading the C.A.R. FHA/VA amendatory clause (Form FVAC) and the loan type on the offer. |
| Appraisal contingency removed, loan contingency still active | The buyer may argue the loan failed because of the low value. The RPA revision C.A.R. posts publicly limits that argument when the buyer otherwise qualifies for the loan. | Your listing agent, reading the loan contingency paragraph in your RPA revision. |
| Shortened or waived in the offer | Wording of the offer controls, and the buyer may have agreed to cover a gap. | Your listing agent, reading the exact addendum language. |
| Period expired, no removal on file | A Notice to Buyer to Perform may be the next step before any cancellation. | Your listing agent, reading the NBP paragraphs (14D and 14E) of your RPA revision. |
What options does the buyer have when the appraisal comes in low?
A buyer facing a low appraisal on a Los Angeles hillside house or a freeway-side condo usually has six realistic moves, and the buyer's lender and agent will walk the buyer through them. Knowing the list helps you predict the opening request.
- Ask for a price reduction. The CFPB frames the low appraisal as leverage for a lower price (CFPB, My appraisal is less than the sale price).
- Cover the difference. The buyer brings more cash, or borrows the same dollars at a higher loan-to-value ratio if the program allows it.
- Request a reconsideration of value. The buyer asks the lender to have the appraiser review new data.
- Renegotiate terms. The buyer may trade closing date, possession, or other terms for a smaller price change.
- Switch lenders. A conventional buyer can move the loan to a different lender, which may order its own appraisal. That usually means asking you for an extension, because the RPA's time periods change only by a signed written agreement (C.A.R., RPA 12/18, paragraphs 14 and 29). A lender that holds more than one appraisal must select the most reliable one, not the one with the highest value (Fannie Mae, Selling Guide B4-1.2-04). FHA's case-number rule limits this route: a borrower who switches FHA lenders has the existing appraisal transferred to the new lender, which orders a new one only if it finds deficiencies (FHA, Handbook 4000.1, Transferring Existing Appraisals). The extension paragraph in the reconsideration section below covers how to answer the request.
- Cancel. If the appraisal contingency is still active, the buyer can end the deal under the contract.
A seller credit is another ask the buyer may make, and it works differently from a price cut than many sellers assume. If the buyer keeps the same loan-to-value ratio, the lender lends against the lower of price or value, so a credit, a split and a full cut all leave the loan the same size (Fannie Mae, Selling Guide B2-1.2-01). What changes is how much cash the buyer must bring to closing and what the choice costs you.
A buyer with room under the program's maximum loan-to-value ratio may skip the extra cash altogether. Fannie Mae sets the maximum for a first mortgage by factors such as credit score, loan product, number of units and occupancy (Fannie Mae, Selling Guide B2-1.2-01), and it requires mortgage insurance on a conventional first mortgage above 80% loan-to-value unless the lender has another form of credit enhancement (Fannie Mae, Selling Guide B7-1-01).
For example, an $800,000 loan on a $950,000 appraisal is about 84%. A buyer who planned an 80% loan on a $1,000,000 price could keep the $800,000 loan at that higher ratio, usually with mortgage insurance, and bring no extra cash. That buyer needs nothing from you, so you have more room to hold your price. A buyer already at the program maximum has no such room, and Fannie Mae's maximum differs by loan.
A credit can cover the buyer's cash only up to the buyer's actual closing costs and the loan program's contribution limit, and it costs you more than an equal price cut because commission and transfer tax stay on the higher price. The gap-options section below puts numbers on that.
As the seller, you also have options. You can hold your price and wait for the buyer to decide, counter with a partial reduction, or ask the buyer to remove the contingency in exchange for a smaller concession. Each choice trades certainty for dollars.
Before you respond, ask your agent whether the buyer has other reasons to stay. Rate locks, moving plans, and sunk inspection costs all tilt the negotiation toward a smaller concession from you.
Hold or cut before you answer
Text or talk with Justin about whether to hold your price or cut it before you answer the buyer's request for a lower price.
Can the buyer ask for a reconsideration of value?
Yes, on many loans. Fannie Mae requires lenders to have borrower-initiated reconsideration of value (ROV) procedures for loans that need an appraisal, to disclose the process when the borrower receives the appraisal, and to state that only one borrower-initiated ROV is permitted per appraisal (Fannie Mae, Selling Guide B4-1.3-12). One attempt means the packet must be good the first time.
The Federal Housing Finance Agency announced on May 1, 2024 that Fannie Mae and Freddie Mac published new ROV policies requiring lenders to disclose the process to consumers, standardizing communication to appraisers, and setting expectations for response times (FHFA, Enterprise Reconsideration of Value Policies). Freddie Mac's own guide language is something the buyer's lender should confirm.
FHA loans work differently. HUD Mortgagee Letter 2025-08, dated March 19, 2025, rescinded FHA's earlier ROV updates, including the borrower-initiated ROV process, and restored the prior Handbook 4000.1 language (HUD, Mortgagee Letter 2025-08). Under the restored policy, the underwriter may request a reconsideration when the appraiser did not consider information that was relevant on the appraisal's effective date, and the appraiser may charge an additional fee in some cases.
Loan type tells you which rules apply: conventional conforming, FHA, VA, or jumbo and portfolio. Conventional loans delivered to Fannie Mae or Freddie Mac follow those companies' ROV policies. A loan under the county limit can still be an FHA or VA loan, and those follow HUD and VA procedures instead. Jumbo and portfolio loans follow the lender's own policy, and the lender decides whether any review is available.
Use the loan limit only to tell conforming conventional loans from jumbo ones. FHFA's 2026 limit for one-unit loans in Los Angeles County is $1,249,125 (FHFA, Full County Loan Limit List 2026), well above the $832,750 baseline that applies in most of the country (FHFA, Conforming Loan Limit Values for 2026).
VA loans run a separate process. When the VA appraiser expects a value below the sales price, the appraiser must notify the requester and allow 48 hours for the real estate agent, lender or Veteran to supply evidence-based data, and the Veteran may request an ROV after the Notice of Value is issued. VA's report also notes that federal law lets a lender submit its own request in some cases (VA, Recommendations for Improving Appraisal Delivery Times, April 2023).
So who starts the request depends on the loan: the borrower on Fannie Mae loans, the underwriter on FHA loans, the Veteran or in some cases the lender on VA loans, and the lender's own policy on jumbo loans. Freddie Mac loans follow Freddie Mac's own guide. Either way, your role is to supply data through the buyer's agent and the buyer's lender.
Expect an extension request while a reconsideration is pending. The buyer may ask for more time on the appraisal or loan contingency, and you may agree, offer a short window, or decline. The RPA's time periods can be changed only by mutual written agreement (C.A.R., RPA 12/18, paragraphs 14 and 29), and DRE lists an Extension of Time Addendum (ETA) among the standard forms (California DRE, Reference Book Chapter 20).
Put any extension in a signed amendment with a fixed calendar date, and ask the buyer's loan officer for a written timeline to compare with that date. An NBP cannot be delivered earlier than 2 days before the applicable time expires, so the new date also sets when you can serve one. Decide before you sign whether you will give an NBP if the date passes with no removal.
What comparable sales should I send for the appraisal review?
Before the appraiser arrives
Your listing agent can act before the report exists. Ask the appraiser, at the inspection visit, to consider your closed comparable sales and a list of permitted upgrades with permit details. Federal valuation rules allow asking an appraiser to consider additional, appropriate property information, including comparable properties, and the appraiser decides what to use (CFPB, Regulation Z, 12 CFR 1026.42(c)(3)(i)). On a VA loan, have the comps ready to send within the 48-hour window that the VA Tidewater process gives the real estate agent, lender or Veteran (VA, Recommendations for Improving Appraisal Delivery Times).
After the report arrives
Send closed sales that an appraiser would accept as comparable, not the highest numbers you can find. Fannie Mae's ROV request must include the borrower name, property address, appraisal effective date, appraiser name, request date, a description of the unsupported or deficient areas, and additional data or comparables, no more than five, with a source such as an MLS listing number, plus an explanation of why the new information supports the request (Fannie Mae, Selling Guide B4-1.3-12).
Work with your listing agent to pull the strongest five from the MLS, and hand them to the buyer's agent for submission. The buyer's lender controls the actual request, so your package should be ready to forward and easy to read.
| Comparable feature | What strengthens the case | What weakens it |
|---|---|---|
| Location | Same neighborhood, same school area, similar street type. | Sales across a Los Angeles freeway, canyon, or hillside line that buyers price differently, such as flat-lot comps used for a view home. |
| Sale date | Closed sales on or before the appraisal's effective date, ideally within the last few months. | Old sales from a different rate environment, and sales that closed after the effective date, which a reviewer may reject. Use pending sales only as supporting data. |
| Size and layout | Similar square footage, bedroom and bath count, lot size, and parking. | Homes with very different living area or no garage. |
| Condition and upgrades | Documented kitchen, bath, roof, or permitted additions that match your home. | Unpermitted work, which an appraiser may discount or ignore. |
| Seller concessions | Sales with few or no credits, so the price reflects value. | Sales where large credits inflated the recorded price. |
Concessions deserve special attention. Fannie Mae's Selling Guide says comparable sales that include sales or financing concessions must be adjusted to reflect the impact, if any, on the sales price, based on the market at the time of sale (Fannie Mae, Selling Guide B4-1.3-09). A comp with heavy credits can look weaker once the appraiser adjusts it.
Add a short written note on features the appraiser may have missed, such as a finished accessory dwelling unit with permits, a recent roof, or a view. Facts and permits beat adjectives.
Check your range before the packet
Get a current value range for your home and browse what is listed near you now, so you know where you stand before you build the packet.
How do appraisal gap clauses, splitting the difference, and price cuts compare?
Start with the gap itself: contract price minus appraised value. In escrow, every approach below answers one question: who covers the gap: the buyer with cash, the buyer with a higher loan-to-value ratio where the program allows it, or you with a lower price. The worked example after the next table shows how the same gap produces different results for you and for the buyer.
An appraisal gap clause is a promise the buyer makes in the offer to cover some or all of a shortfall with cash. Such clauses live in an addendum or in the offer's additional terms, so your listing agent must read the exact wording, including any cap and whether it depends on the buyer's cash reserves. If you accepted an offer with one, ask the buyer to confirm in writing that the money is available.
Splitting the difference means you reduce the price by part of the gap and the buyer brings cash for the rest. A full price reduction to the appraised value removes the gap between price and value. If the buyer keeps the same loan-to-value ratio, the loan stays the same size in every path, because the lender uses the lower of price or value, but the buyer's cash need falls by each dollar you cut. A buyer with headroom under the program limit can instead keep the loan dollars at a higher ratio and need little or no added cash.
| Approach | How it works | Effect on your net | Watch for |
|---|---|---|---|
| Appraisal gap clause | Buyer pays cash for the shortfall, up to a stated limit. | None if the buyer performs. | Wording, caps, and proof of funds. |
| Split the difference | New price equals appraised value plus the buyer's share of the gap. | You give up your share of the gap. | Buyer cash must be real and documented. |
| Full price reduction | New price equals the appraised value. | You give up the whole gap. | Re-check your net proceeds against the new sales price. |
| Seller credit | Price stays, but you pay part of the buyer's closing costs. | Costs you more than an equal price cut, because commission and transfer tax stay on the higher price. | Covers the buyer's cash only up to actual closing costs and the program limit. At the same loan-to-value ratio, the loan amount does not change. |
| Hold price and request ROV | Buyer submits comparables to the lender. | None if the value rises. | One borrower-initiated ROV per appraisal on Fannie Mae loans. |
Credits face limits set by the buyer's loan program. FHA Handbook 4000.1 allows interested parties to contribute up to 6 percent of the sales price toward the borrower's closing costs, prepaid items, and discount points, and contributions above that or above actual costs count as an inducement to purchase (FHA, Single Family Housing Policy Handbook 4000.1).
Fannie Mae allows 3% when the loan-to-value ratio is above 90%, 6% from 75.01% to 90%, and 9% at 75% or less, with investment property capped at 2%. Those percentages apply to the lower of the sales price or appraised value, and a credit must also stay at or below the buyer's closing costs. A credit above those limits is treated as a sales concession that is deducted from the sales price, with loan-to-value recalculated on the reduced price or appraised value (Fannie Mae, Selling Guide B3-4.1-02).
Re-check your net proceeds after any reduction. Commission and transfer tax scale with the new sales price, and your loan payoff does not change. Escrow will recalculate, but you should see the revised estimate before you sign an amendment.
Worked example near the Los Angeles County median
Assume a $1,000,000 contract price, a $950,000 appraisal, and a loan equal to 80% or 90% of the lower of price or value (Fannie Mae, Selling Guide B2-1.2-01). The gap is $50,000. At the full price, an 80% loan falls from $800,000 to $760,000 and a 90% loan falls from $900,000 to $855,000 on the same contract. If the buyer keeps the same ratio, that lower loan is the same in every row of the next table, because the lender uses the lower of price or value; only the buyer's cash and your proceeds change.
A buyer with headroom could instead keep the $800,000 loan at about 84% and bring no added cash, which leaves you more room to hold your price.
The price is round and sits near the $994,670 county median, and the figures are arithmetic, not market data. The tax figures assume a home inside City of Los Angeles limits.
| Path | Sales price | Buyer's added cash at 80% / 90% loan | Your gross change | Transfer tax and commission |
|---|---|---|---|---|
| Hold price, ROV lifts value to price | $1,000,000 | $0 / $0 | $0 | No change. |
| Gap clause covers the shortfall in cash | $1,000,000 | $40,000 / $45,000 | $0 | No change if the buyer performs. |
| Split the gap | $975,000 | $15,000 / $20,000 | $25,000 less | Tax falls $140 ($27.50 County, $112.50 City of LA); commission falls at your listing rate. |
| Full cut to appraised value | $950,000 | $10,000 / $5,000 less | $50,000 less | Tax falls $280 ($55 County, $225 City of LA); commission falls at your listing rate. |
| Seller credit of $50,000 (comparison only) | $1,000,000 | $40,000 / $45,000 before the credit; the credit offsets it only up to actual closing costs and the program limit | $50,000 less | Tax and commission stay on the higher price, so the credit costs you more than the cut. A credit above the buyer's actual closing costs or the program limit is not allowed or is deducted from the price. |
Transfer tax follows the sales price. The County of Los Angeles rate is $1.10 per $1,000, and for property inside City of Los Angeles limits the City adds about $4.50 per $1,000, collected at recording (County of Los Angeles, Documentary Transfer Taxes).
The County lists separate city rates for only five cities: Los Angeles, Culver City, Pomona, Redondo Beach and Santa Monica. Elsewhere in the County, use the $1.10 County rate, and do not apply the City of Los Angeles figure to a home outside City limits. The contract and local custom decide who pays it. The City of Los Angeles entry also lists added tax tiers that start above $5,400,000 for 7/1/26. Those tiers apply only inside City of Los Angeles limits, so they do not reach a home near the county median (County of Los Angeles, Documentary Transfer Taxes).
Run the gap math together
Text or talk with Justin about whether a split, a price cut, or holding firm fits your sale.
Should I hold my price, take a cash buyer, or relist after a low appraisal?
A low appraisal gives the buyer options, not you. You cannot cancel to relist or to take another offer unless the buyer cancels under the contingency, the buyer fails to perform after a Notice to Buyer to Perform, or both parties sign a mutual cancellation (C.A.R., RPA 12/18, paragraphs 14B and 14D); (California DRE, Reference Book Chapter 20).
Your decision comes down to certainty versus price. Holding firm makes sense when the buyer has strong reasons to stay, has loan-to-value headroom, the appraisal contingency is already removed on a conventional or cash offer, or your comparable sales support a reconsideration of value. Against an FHA or VA buyer, a removed contingency does not take away the amendatory clause protection, so holding firm gives you less leverage there. Reducing the price makes sense when the buyer is solid, the move date matters to you, and the gap is small relative to what a restart would cost.
Before you decide, ask the buyer's agent whether the buyer has loan-to-value headroom under the program limit or is already at the program maximum. A buyer with headroom can often absorb part of the gap without asking you for anything, while a buyer at the maximum needs cash from somewhere or a lower price.
Relisting carries its own cost. In Los Angeles County, the median time on market for homes sold in September 2026 was 30 days (C.A.R., September 2026 home sales and price report), and a buyer's cancellation resets your timeline while the market keeps moving. A fresh buyer faces the same appraisal process, and the next appraiser may reach the same value. A relist means roughly 30 days on market plus a new escrow. Multiply your monthly mortgage, tax, insurance and HOA by two to three months, as a planning assumption, and compare that with your share of the gap.
A low FHA appraisal can follow the property to the next FHA buyer. FHA appraisals are valid for 180 days from the effective date (HUD, Mortgagee Letter 2022-11), and the Handbook lets a lender use an existing appraisal for a different borrower (FHA, Handbook 4000.1, Transferring Existing Appraisals), so a new FHA offer within that window may face the same number.
If the next FHA buyer's lender uses the existing case number within 180 days, the same appraisal can apply. HUD's Mortgagee Letter 2022-11 requires a new appraisal for each case number assignment (HUD, Mortgagee Letter 2022-11), so a new appraisal comes only with a new case number assignment. Ask the next buyer's lender which applies before you accept an FHA back-up.
A cash buyer has no lender-ordered appraisal, but a cash offer can still include an appraisal contingency. Check whether the cash offer kept or waived it before you treat it as gap-proof. Cash offers also carry their own risks, including proof of funds and inspection renegotiation. A cash buyer may also try to use your failed escrow as leverage to lower the price, so compare the cash number against your reduced price from the original buyer, not against your original list price.
A back-up offer can change your leverage. If you accepted a back-up offer before the first escrow cancelled, the back-up buyer steps in only if the first contract ends under its own terms. Ask your listing agent to review the exact back-up language with your attorney before you treat the first escrow as over or move the back-up buyer into first position.
Disclosure carries over to the next buyer. DRE's guide says the seller shall disclose all material facts and defects (California DRE, Reference Book Chapter 20), and findings from the first buyer's inspection belong in that disclosure if the sale fails. The appraised number is usually not a property defect, but physical issues or permit problems the appraisal revealed should be reviewed for disclosure with your agent. Update your disclosure package before the relist goes live.
Market figures here are Los Angeles County-wide, not City of Los Angeles, and monthly figures change. Check current numbers with your agent before you set a price. All sources were checked October 28, 2026.
Frequently asked questions
Do I have to lower my price if the appraisal is low?
No. The contract price stays the same unless both parties sign an amendment. What changes is the buyer's financing and, if the appraisal contingency is still active, the buyer's right to cancel under the contract's terms. Your options are to hold, counter, or reduce. Read your contract with your listing agent before you decide how much leverage you have.
Who pays for the appraisal if the deal cancels?
Usually the buyer. The buyer pays the lender's appraisal fee, and on a cancellation the RPA releases the deposit less the buyer's own fees and costs. You owe nothing for it unless you agreed in writing. If you agree to cover any part of it, put the amount in a signed amendment so escrow can follow it.
Can a seller credit solve a low appraisal?
Partly. If the buyer keeps the same loan-to-value ratio, the lender lends against the lower of price or appraised value whichever option you pick, so a credit does not change the loan size. It can cover the buyer's cash shortfall, but only up to the buyer's actual closing costs and the loan program's limit. It also costs you more than an equal price cut, because commission and transfer tax stay on the higher price.
Will a cash buyer face the same appraisal problem?
A cash buyer has no lender-ordered appraisal, but a cash offer can still include an appraisal contingency, and the buyer chooses the appraiser. Check whether the cash offer kept or waived it before you treat it as gap-proof. Cash offers carry other risks, such as proof of funds and inspection requests, so compare net proceeds and certainty.
How long does a reconsideration of value take?
There is no fixed deadline; timing depends on the lender and appraiser. The Federal Housing Finance Agency says the Fannie Mae and Freddie Mac policies set expectations for response times. Ask the buyer's loan officer for a written timeline, and compare it against your contingency deadlines.
Is an appraisal gap clause enforceable?
Enforceability depends on the exact wording, the signatures, and the facts of your transaction, which makes it a question for a real estate attorney. In practical terms, the clause is only as useful as the buyer's cash and the dollar cap written into the document. Ask the buyer for proof of funds before you rely on it.
Should I order my own appraisal before listing?
A pre-listing appraisal gives you a data point, but the buyer's lender will order its own and is not bound by yours. Many sellers rely on a broker price opinion and recent closed sales instead, which can run thin for a hillside or view home with few true comparables. Whatever you choose, expect the lender's appraiser to start from fresh comparable sales.
Appraisal came in low? Talk it through
Get a value range for your home, or text Justin to talk through holding or cutting your price before you answer the buyer.
About the author
Justin Borges
REALTOR® | CA DRE #01940318
Justin writes LA Metro Home Finder’s guides to 30+ communities across the San Gabriel Valley, Northeast LA, and greater Los Angeles, and has closed $200M+ in career sales with a 106% average list-to-sale ratio.
Justin has held an active California DRE salesperson license since October 2013. View Justin’s author profile.
This guide is educational and is not legal, tax, title, lending, or insurance advice. Contract forms, statutes, and lender rules change. Confirm the terms that apply to your sale with your escrow officer, title officer, lender, or a California real estate attorney.
