You agreed on a price, everyone signed, and then the appraisal comes back under the contract number. It feels like the deal just died. Most of the time it has not. It has changed shape, and there are a handful of ways to fix it, in roughly the order I try them.
Why this happens at all
A lender will only lend against the appraised value, not the contract price. If your loan needs the house to be worth what you agreed to pay, and the appraiser's number comes in under that, the lender's math no longer works the way the contract assumed. The gap between the contract price and the appraised value has to be closed somehow, by somebody, before closing can happen the way everyone planned.
Option one: the buyer covers the gap in cash
If the buyer has the cash and still wants the house at the agreed price, they can simply bring the difference to closing themselves, on top of their down payment. This is the cleanest fix when it is available, because nothing about the contract has to change. It just is not available to every buyer, and it should never be assumed.
Option two: the seller adjusts the price
The seller can agree to lower the price to match, or somewhere close to, the appraised value. This keeps the deal alive without asking the buyer to find extra cash, but it means the seller is absorbing the gap instead. Whether that makes sense depends on how the seller is reading their own market position, which is the same read I describe in why terms make the deal as much as price does.
Option three: split the difference
Sometimes the cleanest path is neither side absorbing the whole gap. The buyer brings some extra cash, the seller comes down some, and both sides keep the deal without either one feeling like they lost the negotiation outright. This works best when both sides still want the deal more than they want to be right about the number.
Option four: challenge the appraisal
An appraisal is one person's opinion of value, built on comparable sales they chose. It is not unreachable. If there is a real case that the appraiser missed a comparable, used a stale one, or misjudged the condition of the property, that case can be made back to the lender, sometimes resulting in a revised value. This takes real evidence, not just disappointment with the number, and it does not always work. It is worth trying when the case is genuinely strong.
Option five: walk away
If the contract has an appraisal contingency and none of the above gets both sides to a number they can live with, either side can walk. This is the least common outcome, but it exists for a reason, and knowing it is there is part of what keeps the earlier conversations honest instead of desperate.
What actually saves most deals
In my experience it is rarely one clean option. It is a short, direct conversation, sooner rather than later, about what each side can actually live with. The deals that survive a low appraisal are almost always the ones where both sides keep talking instead of digging in, the same principle behind negotiating verbally and papering it once.
The takeaway
A low appraisal is a problem to solve, not a verdict. Know the order of options before you are standing in the middle of one, and you will make a clearer decision when it actually happens.