FHA Appraisals High and Low
February 25, 2026
Once the appraiser completes the report and the underwriter reviews the findings, the results dictate the next steps. Did the appraisal come in high? Low? There are several scenarios to know.
What happens if the appraisal matches or exceeds the sales price?
The mortgage process moves toward the closing stage. The lender uses the lower of the two values to calculate the maximum loan amount. If the appraiser finds no physical deficiencies, the lender issues a "clear to close" regarding the property condition. The buyer uses their original down payment calculation, and further negotiations are rarely required.
How does a low appraisal affect the loan amount?
The lender will not provide a loan for the full purchase amount if the appraised value is lower than the sales price. FHA guidelines base the loan-to-value ratio on the appraised value, which creates a gap between the contract price and the available mortgage funds.
Can a buyer negotiate if the appraisal comes in low?
Yes. The buyer can request a lower purchase price to match the appraised value. If the seller refuses, the buyer can choose to pay the difference in cash. FHA rules prohibit the lender from including this gap in the mortgage, so the buyer must prove they have the funds without using a loan.
Does the buyer lose their deposit if they walk away due to a low appraisal?
FHA loans include an amendatory clause that lets the buyer withdraw from the contract without losing their earnest money deposit. If the buyer and seller cannot agree on a price or a cash difference, the buyer can walk away.
What does it mean if an appraisal is "subject to" repairs?
This indicates the appraiser valued the home at the sales price but noted specific conditions that do not meet HUD 4000.1 requirements. The appraisal is considered an "as-repaired" value, meaning identified repairs must be finished before the loan can close.
What are common repair requirements for an FHA loan?
Common issues include safety hazards like peeling paint in homes built before 1978, missing handrails, or exposed wiring. Appraisers also flag structural issues with the roof or foundation, and non-working systems such as HVAC, plumbing leaks, or electrical problems.
Who is responsible for completing required repairs?
The seller usually pays for and completes these repairs. Once the work is finished, the appraiser or a qualified inspector must return to the property for a final inspection to verify the home meets Minimum Property Standards.
What is a Reconsideration of Value?
This is a formal dispute of the findings if the borrower or lender believes the appraisal is inaccurate. The borrower or their agent must provide data on comparable sales that the appraiser did not include. These sales must be similar in size, location, and condition to the subject property.
Can a buyer order a new appraisal if they switch lenders?
No. If a borrower switches lenders, the original FHA appraisal must transfer to the new lender. A second appraisal is only permitted for documented material deficiencies in the first report or if the first appraiser was not on the FHA roster.
How long is an FHA appraisal valid?
An FHA appraisal is typically tied to the property for 180 days. If the loan does not close within this window, the appraisal expires. The lender must then order a new appraisal or an update to ensure the value and condition still meet HUD standards.
Why does the appraisal give the buyer leverage in negotiations?
Sellers are often motivated to negotiate because the FHA appraisal is attached to the property in the FHA system. If another FHA buyer makes an offer later, the existing appraisal will likely still apply, making it beneficial for the seller to address price cuts or repairs with the current buyer.
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