Low Appraisal in New York: What Happens When It Comes In Under the Contract Price

Why a low appraisal matters: the lender’s rule

The appraisal is ordered by the buyer’s lender to support the loan. For a purchase, Fannie Mae’s rule is that the property value used for the loan is the lower of the sales price or the appraised value. So if the appraisal is below the contract price, the loan the buyer applied for is now a larger share of the value. The lender may reduce the loan amount or require the buyer to bring more cash to closing. Depending on the loan program and the loan-to-value ratio, it can also change whether mortgage insurance is required and what it costs.

The appraisal does not change the contract. The price is still the price you and the buyer signed. What changes is how the buyer pays it, and that puts four outcomes on the table:

1. The buyer covers the difference in cash, either by choice or because the contract has an appraisal-gap clause that commits them to it.
2. You and the buyer agree a new price, or split the difference. Any change is a written amendment the attorneys prepare.
3. The buyer asks for a reconsideration of value: the lender asks the appraiser to look again at evidence the report may have missed.
4. The buyer cancels, if the contract’s mortgage contingency (or a separate appraisal contingency) gives them that right and its deadline has not passed.

A buyer paying cash has no lender appraisal unless they order one, and some financed loans close with none: Fannie Mae’s underwriting system can offer “value acceptance” on eligible loans in place of an appraisal.

How a New York contract handles it

On Long Island and in New York City the customary sequence is inspection, then contract, then appraisal, though individual deals vary. So a low appraisal usually arrives with a signed contract already in place. What happens next is set by that contract, mainly by three clauses:

• The mortgage contingency. A financed buyer’s contract usually includes one: if the buyer cannot obtain the loan commitment the contract requires, on its terms and by its date, the contract may let the buyer cancel and recover the deposit. A low appraisal can reduce the commitment a lender will issue, but it does not by itself give the buyer the right to cancel. What counts is the wording: the loan amount the clause names, whether a commitment for less satisfies it, and whether the deadline has passed.
• An appraisal contingency, which applies only if the contract expressly includes one. Where it is negotiated, it ties the buyer’s right to cancel to the appraised value itself rather than to the loan commitment.
• An appraisal-gap clause, where the buyer added one. It commits the buyer to pay some or all of a shortfall in cash (more below).

A low appraisal does not automatically give a buyer the right to cancel a New York real estate contract. The buyer’s rights depend on the specific mortgage contingency, any separately negotiated appraisal provisions, applicable deadlines, and whether the lender can issue the financing commitment required by the contract. The parties should consult their respective attorneys before relying on a contingency.

Joseph is also an attorney, and he flags these points early. As your broker he does not act as your attorney: your own attorney reads the contract, advises you on it and deals with the buyer’s attorney.

Reconsideration of value: asking the appraiser to look again

A reconsideration of value (ROV) is a request from the lender asking the appraiser to reassess the value. In July 2024 five federal regulators, the CFPB, the Federal Reserve Board, the FDIC, the NCUA and the OCC, issued guidance on how lenders handle these requests. Fannie Mae’s rules for the loans it buys:

• The borrower starts it. That is the buyer, not you. The lender must explain its ROV process when it gives the buyer the appraisal.
• One request per appraisal, and it must come before closing.
• Up to five alternative comparable sales may be submitted, with their sources and an explanation of why they support a different value, along with any errors or missing facts in the report.
• The lender reviews it first, then sends it to the appraiser, who returns a report with conclusions whatever the outcome. The lender may order a new appraisal if it finds the report deficient.

Your part as the seller is the evidence. The most useful is recent closed sales of similar homes nearby, plus facts the appraiser may not have had: finished space, permitted improvements, a renovation. These go to the buyer’s side, who decides whether to file. A reconsideration can confirm the original value; it is a request, not an appeal that must succeed.

Federal Regulation B also requires the lender to give the buyer a copy of the appraisal promptly on completion, or at least three business days before closing. The seller generally is not automatically entitled to receive it from the lender, but can ask the buyer to share it.

Appraisal-gap clauses

An appraisal-gap clause is a promise in the contract that the buyer will pay up to a stated amount above the appraised value in cash. It does not change what the lender will lend. It decides, before anyone sees the appraisal, who covers the difference.

Three things decide what one is worth to a seller when comparing offers:

• The cap. A clause covers the gap up to its stated amount; anything beyond it is back on the table.
• The cash behind it. The promise is only as good as the money the buyer has after the down payment and closing costs.
• How it fits the mortgage contingency. A gap clause and a cancellation right can pull in different directions; the attorneys draft them to work together.

What Joseph does for a seller when an appraisal comes in low

1. Before you accept: he compares the financing behind each offer, not just the price: the loan size, the down payment, any appraisal-gap clause, and where the price sits against recent comparable sales.
2. When the figure arrives: he asks the buyer’s side for the appraised value and the reasons, and checks the contract’s deadlines with you and your attorney. The buyer and the lender hold the report, so this depends on their cooperation.
3. The evidence: he pulls the recent closed sales that bear on the value, and any facts the report may have missed, and offers them to the buyer’s side. Only the buyer can ask the lender for a reconsideration of value, so whether one is filed is the buyer’s decision.
4. Your decision: keep the price and let the buyer find the cash, meet partway, or, where the contract allows the buyer to cancel, go back to the market. He lays out what each one means for your timing; the choice is yours.

How often homes sell above asking, by county and type

When an agreed purchase price exceeds the recent comparable sales available to an appraiser, the appraisal may come in below the contract price. Sales above asking price can provide market context, but they do not establish how frequently appraisals fall short. We do not see appraisal reports; the figures below count sales that closed above their final listing price.

“Above asking” = the sale price was higher than the final list price. “Typical margin” = the median amount above asking among those sales. ▲/▼ marks a change from a year earlier larger than chance would explain; no mark means about the same. Last 12 months = November 2025 to October 2026; a year earlier = November 2024 to October 2025.

Brooklyn is not included in the county statistics because the available sales dataset does not yet provide sufficiently complete borough-wide coverage. The general guidance on low appraisals also applies to Brooklyn transactions.

Month by month: sales above asking

Share of each month’s closed sales (single-family, condo and coop together) that sold above the final asking price, November 2024 to October 2026. A sale closes about one to three months after its contract is signed, so each point reflects contracts agreed a little earlier.

• Nassau: above asking about as often as a year earlier. Over the last 12 months the highest month was June 2026 (55%) and the lowest January 2026 (40%).
• Suffolk: above asking about as often as a year earlier. Over the last 12 months the highest month was July 2026 (65%) and the lowest February 2026 (49%).
• Queens: above asking about as often as a year earlier. Over the last 12 months the highest month was December 2025 (24%) and the lowest March 2026 (17%).

Frequently Asked Questions

Sources for the rules on this page

• Fannie Mae Selling Guide B2-1.2-01, Loan-to-Value Ratios: for a purchase, value is the lower of the sales price or the appraised value.
• Fannie Mae Selling Guide B4-1.3-12, Appraisal Quality Matters: the borrower-initiated reconsideration of value.
• Interagency guidance on reconsiderations of value, July 18, 2024 (CFPB, Federal Reserve Board, FDIC, NCUA, OCC).
• Regulation B, 12 CFR 1002.14: the applicant’s copy of the appraisal.
• Fannie Mae Selling Guide B4-1.4-10, Value Acceptance: loans that close without an appraisal.

Rules checked October 23, 2026. Lenders, loan programs (FHA, VA, jumbo, coop loans) and contracts differ; the lender and your attorney confirm what applies to your sale.

Related for sellers

• Selling in Nassau, Suffolk, Queens or Brooklyn: how we sell homes.
• For a home still on the market: how close sales land to asking, and how long homes take.
• Costs at the closing table: what sellers pay at closing in New York.

Talk to Joseph about an offer or an appraisal.