Appraisal came in low — now what?

Derek, you have a few options: 1. Challenge the appraisal — if you have strong comps that the appraiser missed, you can request a reconsideration of value (ROV). This works maybe 20-30% of the time but worth trying. 2. Find a different lender with a higher LTV limit — some lenders go to 80% or even 85% LTV 3. Negotiate with the borrower — even if they don't want to put more money in, they may have other options (seller credit, reduced purchase price) 4. Restructure the deal — if there's a seller, can they carry a small second? What were the comps the appraiser used vs what you expected?

Priya — the appraiser used comps from 6 months ago in a different neighborhood. I have 3 comps from the past 60 days that support our value. Going to try the ROV first.

Good — 60-day comps vs 6-month comps is a strong ROV argument, especially if the market has moved. Document everything clearly and submit to the lender in writing.

ROV. Then backup lender. In that order.

low appraisals are the WORST. had one kill a deal last month that i worked on for 6 weeks. feel your pain man

This is a classic headache, and Shawn, I feel your pain on the deal killer. We've had a few of these recently, especially with some of the market shifts. Priya and Sarah are spot on with the ROV first. We've had success arguing for specific comps, particularly if the appraiser used anything older than 90 days in a hot market, or if they missed recent sales that closed after their inspection. Our team now has a pre-appraisal checklist where we ask the client for any recent neighborhood sales they know of, and we feed that to the lender's appraisal desk proactively. It doesn't always work, but it sets the stage. If the ROV fails, we immediately pivot to a backup lender. Our CRM flags deals with potential appraisal issues, and we start researching alternative lenders with higher LTV thresholds or different appraisal panels even before the first one comes back, especially on trickier asset types like specialized commercial properties. It's about having those systems in place to react quickly and save the deal.

Ugh, this is the absolute worst feeling. I just had a similar situation last month on a refi for a conventional loan. Appraisal came in 10% under, which blew our 80% LTV out of the water. We were at 88% and the borrower couldn't bring more cash. I totally agree with Sarah and Marvin – ROV is always the first move. For mine, I compiled a bunch of comps myself that were closer in size and condition, and specifically pointed out some major upgrades the appraiser missed. It actually worked! They bumped it up enough to hit our target LTV, which was a huge relief. It took an extra 5 days, but saved the deal. What kind of property is it? Sometimes that makes a difference in what comps are available. Good luck, hope the ROV works out!

This is a tough spot, and unfortunately, it's becoming more common, especially with cap rate expansion in certain markets. Beyond the ROV, which is always the first step, let's look at some options. First, review the comps used. Did the appraiser miss recent sales, or use properties with inferior locations/conditions? I had a multifamily deal in Phoenix last year where the appraiser used comps from a B-class area for an A-class property. We successfully challenged it, getting a 7% bump by providing three superior, recent sales. Second, consider a different lender. Some bridge lenders, for instance, have more flexible LTVs or will allow for a higher loan-to-cost if the deal underwrites well on DSCR. We recently closed a bridge loan at 75% LTV on a transitional asset where the initial appraisal came in 15% low, but the lender was comfortable with the sponsor's business plan and strong cash flow projections. Finally, if the borrower is truly tapped out, explore mezzanine debt or preferred equity to fill the gap. It's more expensive, but it keeps the deal alive without additional sponsor capital. It's all about understanding the true value drivers and finding a capital partner who sees them.

Shawn, I totally get it. This just happened to me on an FHA purchase last month. Our value was $350k, and the appraisal came in at $325k. It wasn't a 12% drop like yours, but that $25k difference meant the borrower's down payment went from 3.5% to almost 10% just to hit the LTV. They were stretched already, so it was a tough conversation. We did try the ROV, but the appraiser held firm, citing limited recent comps in that specific neighborhood. What did you find when you reviewed the appraisal? Were there any obvious comps missed, or was it more of a general market adjustment? I'm curious if anyone has had success with a second appraisal on a conventional loan if the ROV fails, or if it’s usually just a waste of time and money. It feels like a gamble when the borrower is already hesitant to put in more cash.

Is this a purchase or a refi?

Shawn, this is a classic scenario we see all the time, especially in today's market where comps are getting tighter. A 12% drop is significant. First, Fred's question is key: purchase or refi? If it's a purchase, the seller might need to budge, or the buyer needs to find more cash. For a refi, it's usually just more cash or walking away. We often see this on bridge loans where the borrower's ARV is aggressive. If our max LTV is 70% and the appraisal brings it to 79%, that's a hard stop. We can't just ignore our risk parameters. We'd look at a revised scope of work if it's a rehab, or maybe a second appraisal if the first one had clear errors, but that's rare. Sometimes, the only option is to bring in more equity or accept a lower loan amount, which means less cash out for the borrower. It's tough, but that's how we manage risk on our side.

Shawn, that 12% hit is rough, especially when it pushes you over the LTV limit. I've seen this play out a few times, particularly on fix & flip deals where the ARV is a moving target or on DSCR properties in certain markets. For a bridge loan I had last month, we were targeting 75% LTV on a $600K value, appraisal came in at $540K. That 10% drop meant the borrower had to come up with another $45K to stay at 75% LTV, which they couldn't. We ended up having to find a different lender with a higher LTV threshold for that specific property type, but it cost us a point on the rate. Have you looked at challenging the appraisal? What type of property is this? Sometimes on DSCR, if it's a unique rental, comps can be tough. Any recent sales in the last 60 days that support your original value?