You found the house. You negotiated a price everyone could live with. The inspection went fine. Then, about two weeks into escrow, the appraisal comes back — and it’s $15,000 under the contract price.
It doesn’t happen on most deals. Industry estimates have long put low appraisals at somewhere around 8% of purchase transactions in a normal market, and higher when prices are running hot. But when it does happen, it can feel like the whole deal is about to fall apart.
It usually doesn’t have to. I’ve walked buyers and sellers through low appraisals here in Redding, and almost every one of them had a workable path forward. Here’s how it works, what your real options are, and how to lower the odds of it happening in the first place.
Why the Appraisal Matters So Much
If you’re financing a home, your lender doesn’t lend against the price you agreed to pay. It lends against the lower of the purchase price or the appraised value.
So if you’re buying a $400,000 home with 10% down, the lender expects to loan $360,000. If the appraisal comes in at $385,000, that same 90% loan is now only $346,500. Somebody has to account for the $13,500 difference — or the price has to change.
Cash buyers don’t have this problem, which is one reason sellers like cash offers. But most of my Redding buyers are using conventional, FHA, VA, or USDA financing, so the appraisal is a real milestone in nearly every escrow.
Why Appraisals Come in Low in the Redding Market
Appraisers look backward. They build their value mostly from closed sales of similar homes nearby, usually from the last three to six months. That creates a few situations where the number can lag behind the contract:
- Unique properties. Acreage, shops, horse setups, well-and-septic homes, and custom builds in places like Palo Cedro, Shasta Lake City, or out toward Millville often have very few true comparables.
- A flat market. Redding home values have been fairly steady this year — Trulia’s estimate of the typical Redding home value was about $387,000 in August 2026, roughly flat since January. In a flat market there’s less room for a buyer to “pay up” and have the comps catch up later.
- Upgrades that don’t show up in the comps. A new roof, owned solar, or a remodeled kitchen matters to buyers, but an appraiser can only give credit that the market data supports.
- Multiple-offer bidding. When a well-priced home draws several offers, the winning price can land above anything that has closed nearby.
None of this means the appraiser did something wrong. It means the data and the deal didn’t line up. Sometimes, though, there are mistakes — which brings us to your options.
Your Options When the Appraisal Comes in Low
Here are the four main paths. Most deals end up using some combination of them.
1. Renegotiate the price. This is the most common outcome. Fannie Mae research on low appraisals found that they sharply raise the chance of a downward price renegotiation — and that most of those deals still closed without major delays. Sometimes the seller comes all the way down to the appraised value; often buyer and seller meet in the middle.
2. The buyer covers the gap in cash. If you love the house and have the savings, you can bring extra cash to close to make up the difference. Before you do, ask yourself honestly whether you’d be comfortable if you needed to sell in two or three years.
3. Challenge the appraisal. If the appraiser missed a better comparable sale, got the square footage wrong, or overlooked a major feature, your lender can submit a request for review. More on that below.
4. Cancel the contract. If you still have your appraisal contingency in place and the two sides can’t agree, a buyer can generally cancel and keep their earnest money deposit. This is the safety net — and why the timing of removing contingencies matters so much.
The Appraisal Contingency: Timing Is Everything
In California, most home purchases use the C.A.R. Residential Purchase Agreement, and buyer contingencies — including appraisal — have commonly defaulted to 17 days after acceptance unless the parties agree to something different. Always check your specific contract; your agent should walk you through every deadline on day one.
Here’s why it matters. If you remove your appraisal contingency before the appraisal comes back, and it then comes in low, you may be on the hook to cover the gap yourself or risk your deposit.
In competitive situations, some buyers choose to shorten or waive the appraisal contingency, or offer to cover a set amount of any appraisal gap (for example, “buyer will cover up to $10,000 of an appraisal shortfall”). That can make an offer stronger. It’s also a real financial commitment, so only do it with money you actually have and are willing to spend.
How to Challenge a Low Appraisal (and When It’s Worth It)
Since 2024, FHA, Fannie Mae, and Freddie Mac have all required lenders to give borrowers a clear process for requesting a Reconsideration of Value (ROV). Your lender has to tell you how it works, and you’re generally allowed one ROV request per appraisal.
An ROV is worth pursuing when you can point to specific, factual issues, such as:
- A recent nearby sale that’s a better match than the ones the appraiser used
- Wrong square footage, bedroom count, or lot size
- A major upgrade or feature that was missed entirely
It’s not worth much if the only argument is “we think it’s worth more.” Appraisers respond to data, not feelings. A good local agent can pull comparable sales from the MLS that may not have shown up in the appraiser’s search — especially in rural parts of Shasta County where good comps are thin.
VA buyers have an extra layer of protection: under VA’s “Tidewater” process, the appraiser typically gives the agents notice before finalizing a value that will come in under the contract price, which opens a short window to submit additional comparable sales.
How Sellers and Buyers Can Lower the Odds of a Low Appraisal
For sellers: if you’re selling in Redding this fall or winter, a little preparation goes a long way:
- Price with the comps, not the hope. The single best protection against a low appraisal is a list price that recent sales can support.
- Make a list of upgrades with dates and costs. Roof, HVAC, windows, solar (owned, not leased), remodels, permits. Your agent can share it with the appraiser.
- Have your agent meet the appraiser or provide a short comps package. Appraisers don’t have to use it, but it helps them see what we see.
- Know your plan B. Before you accept an offer, think about how much flexibility you have if the appraisal comes in a bit short.
For buyers: protect yourself before you write the offer.
- Talk with your lender about how a low appraisal would affect your loan and cash to close.
- Keep a cushion in savings if you can, separate from your down payment and closing costs.
- Don’t remove your appraisal contingency early unless you’ve decided you’re comfortable covering a gap.
- Ask your agent to look at the comps before you offer — if the price is already a stretch compared to recent sales, you’ll know going in.
The Bottom Line
A low appraisal is a speed bump, not usually a dead end. In my experience, most Redding deals that hit one still close — sometimes at a better price for the buyer, sometimes with a creative middle ground, occasionally with a corrected appraisal. What makes the difference is knowing your contract deadlines, having real comparable sales data, and having someone in your corner who keeps everyone calm and focused on a solution.
If you’re buying or selling in Redding or anywhere in Shasta County and want to talk through how an appraisal could affect your plans, I’m always happy to help — no pressure.
530-953-1100 · jcreteam.com/contact · [email protected]
About Justin Cartwright — Justin Cartwright is a third-generation Shasta County resident and licensed REALTOR® with Waterman Real Estate in Redding, CA. He and the JCRE Team specialize in helping buyers and sellers navigate the Redding and greater Shasta County market with honest guidance and genuine care. DRE License #02093872 · Waterman Real Estate, 1760 Churn Creek Rd, Redding, CA 96002 · 530-953-1100.
Sources: Fannie Mae Economic & Strategic Research, “When Appraisers Go Low, Contracts Go Lower”; CoreLogic data via HomeLight (share of appraisals below contract price); HUD Mortgagee Letter 2024-07 and FHFA/Fannie Mae/Freddie Mac Reconsideration of Value policies; Trulia Redding home value data (August 2026); California Association of REALTORS® contingency guidance. This article is general information, not legal or lending advice — check your specific contract and loan terms.
