If a home appraises for less than the purchase price in Washington, the buyer’s lender will generally only lend based on the lower appraised value, so someone has to cover the difference or the deal has to change. On a standard NWMLS financing addendum (Form 22A), a low appraisal opens a short, defined negotiation: the buyer gives notice, the seller can respond with options such as a reappraisal request or a price reduction, and the buyer then decides whether to proceed or terminate. The gap between price and value is often called the “appraisal gap.”
Whether you’re buying or selling in Pierce County, it helps to understand how this works before you’re in the middle of it, because the deadlines are short.
Why a low appraisal matters
A lender bases the loan on the lower of the purchase price or the appraised value. If you agreed to pay $700,000 and the home appraises at $680,000, the lender treats the home as a $680,000 purchase. With a 10% down payment, that means a smaller loan than the buyer planned on, and a $20,000 difference that isn’t covered by the loan.
| Planned | After low appraisal | |
|---|---|---|
| Purchase price | $700,000 | $700,000 |
| Appraised value | $700,000 | $680,000 |
| Loan at 90% of value | $630,000 | $612,000 |
| Cash needed for price (before closing costs) | $70,000 | $88,000 |
Simplified illustration only. Actual loan terms depend on the loan program and lender.
How the NWMLS financing addendum handles it
Most financed purchases in Western Washington use NWMLS Form 22A, the financing addendum. It includes a section for when the appraisal comes in below the sale price. In general terms:
- Buyer gives notice. The buyer notifies the seller of the low appraisal, usually with a copy of the appraisal, commonly using Form 22AN.
- Seller responds. The seller may request a reconsideration or reappraisal, agree to lower the price to the appraised value, propose a partial reduction with the buyer covering the rest, or decline to change anything.
- Buyer decides. Depending on the seller’s response, the buyer can accept, waive the financing contingency and cover the gap, or terminate.
If the buyer properly terminates under the appraisal provision, the earnest money is typically returned to the buyer. The addendum sets specific deadlines for each step, and NWMLS forms are revised periodically, so always confirm the exact terms in the version you signed. For how contract timelines start, see what happens at mutual acceptance.
Options if you’re the buyer
- Ask for a price reduction to the appraised value.
- Split the difference with the seller.
- Cover the gap with cash, if you have it and still believe in the price.
- Challenge the appraisal through the lender’s reconsideration-of-value process, with better comparable sales if they exist.
- Terminate under the appraisal provision if you can’t reach agreement.
Some buyers commit upfront to covering part of a gap to make an offer stronger. In Washington, NWMLS Form 22AD (increased down payment addendum) is one tool agents use for this. It’s a real financial commitment, so know your cash limits before you use it.
Selling and worried about the appraisal?
A well-supported list price and a strong appraiser package protect the price you negotiated. Request a complimentary Home Selling Strategy Session with Josh.
Options if you’re the seller
- Request a reconsideration with comparable sales the appraiser may have missed.
- Reduce the price to keep the sale together, especially if the next buyer’s lender would likely order a similar appraisal.
- Meet in the middle with the buyer.
- Hold firm and accept the risk the buyer terminates.
Before deciding, ask a simple question: if this buyer walks, what will the next appraisal likely say? A low appraisal on a financed sale is information the next buyer’s lender will often reach too.
How sellers can reduce appraisal risk
- Price based on closed sales, not just hopeful active listings.
- Prepare a one-page list of upgrades with dates: roof, HVAC, windows, kitchen, bath, permits.
- Share recent comparable sales that support your price with the appraiser through your agent.
- Make sure the appraiser has access to every part of the home, including outbuildings and the attic if relevant.
When multiple offers push a price well above recent sales, an escalation addendum can raise appraisal risk. Weigh offers on how likely they are to close, not only on price.
Does the loan type matter?
Yes. FHA and VA loans have their own appraisal rules and required notices, and the financing addendum treats some government-backed loans differently when it comes to price reductions. Cash buyers may not need an appraisal at all. If you’re buying near JBLM with a VA loan, our guide to buying a home near JBLM is a good place to start.
Frequently asked questions
Can I get my earnest money back if the appraisal is low?
If your contract includes the financing and appraisal protections and you follow the notice and termination steps on time, the earnest money is typically refunded. Missing a deadline can change that, so track dates carefully.
Is an appraisal the same as a home inspection?
No. An appraisal estimates value for the lender. An inspection evaluates condition for the buyer. See home inspection contingencies in Washington.
Do low appraisals mean the market is falling?
Not necessarily. Appraisals look backward at closed sales. When prices move quickly, or a home is unusual, appraisals can lag.
Talk through your options before you sign
Most appraisal problems are easier to prevent than to fix. Book a complimentary strategy session with Josh Barnard and The Barnard Group, whether you’re pricing a home to sell or writing an offer on your next one.
This article is general information and not legal or lending advice. NWMLS forms are revised periodically; review the current forms with your agent and consult an attorney for legal questions.
