A low appraisal can be one of the most stressful curveballs in a real estate transaction. You’ve negotiated a price, conditions are in place, and then the bank’s appraisal comes in lower than expected—suddenly putting financing (and the entire deal) at risk. This situation is more common than many buyers and sellers realize, especially in shifting markets or unique neighbourhoods.
If you’re buying or selling in Alberta, understanding how appraisals work and knowing your options can be the difference between salvaging the deal and watching it fall apart. Below is a practical, step-by-step guide for both buyers and sellers when a low appraisal compromises financing.
First: Why Appraisals Matter
When a buyer needs a mortgage, the lender orders an appraisal to confirm the property’s market value. The bank will lend based on the lower of the purchase price or the appraised value.
For example:
Purchase price: $500,000
Appraised value: $475,000
The bank will base the mortgage on $475,000—not $500,000. That $25,000 gap must be addressed, or financing may fail.
If You’re the Buyer: Your Options
1. Review the Appraisal Carefully
Appraisals are not infallible. Ask your lender for a copy and review it with your REALTOR®. Look for:
Incorrect square footage or room count
Missing upgrades or renovations
Poor or outdated comparable sales
Comparables from the wrong neighbourhood
Sometimes the issue isn’t value—it’s bad data.
2. Request a Reconsideration of Value
If errors or weak comparables are found, your lender may allow a reconsideration of value. This involves submitting:
Better, more recent comparable sales
Documentation of upgrades
Market data supporting the agreed price
This doesn’t guarantee a change, but it’s often worth trying—especially in fast-moving or low-inventory markets.
3. Increase Your Down Payment
If the appraisal stands, you may be able to bridge the gap by increasing your down payment.
Using the earlier example:
Appraised value: $475,000
Purchase price: $500,000
You would need to cover the $25,000 difference in cash on top of your original down payment.
This works best for buyers who:
Have available savings
Strongly want the property
Believe the long-term value supports the price
4. Renegotiate the Purchase Price
A low appraisal creates leverage for renegotiation. You can ask the seller to:
Reduce the price to the appraised value, or
Meet somewhere in the middle
In balanced or buyer-leaning markets, sellers are often open to this rather than relisting and risking another low appraisal.
5. Walk Away (If Conditions Allow)
If you have a financing condition, a low appraisal that prevents mortgage approval may allow you to exit the deal without penalty.
This is never ideal, but it protects buyers from overextending themselves or buying at a price the bank won’t support.
If You’re the Seller: Your Options
1. Stay Calm and Assess the Situation
A low appraisal feels personal—but it’s not a judgment of your home. It’s one appraiser’s opinion based on a snapshot of market data.
Remember:
The buyer likely still wants the property
Relisting does not guarantee a higher appraisal next time
Your goal is to protect your net proceeds and keep the deal together.
2. Review the Appraisal with Your REALTOR®
Just like buyers, sellers should scrutinize the appraisal for:
Missing features (garage, finished basement, upgrades)
Inferior comparables
Inaccurate measurements or descriptions
If valid concerns exist, the buyer’s lender may consider a reconsideration of value.
3. Renegotiate Strategically
You may choose to:
Reduce the price to the appraised value
Split the difference with the buyer
Offer a price reduction in exchange for removing conditions or adjusting possession dates
While reducing price is frustrating, it may be preferable to starting over—especially if market conditions are softening.
4. Consider the Risk of Relisting
If the deal collapses and you relist:
Future buyers may face the same appraisal issue
Days on market increase
Buyers may assume something is wrong with the property
In many cases, working with the current buyer is the least risky path.
5. Adjust Expectations Based on the Market
Appraisals often lag behind rapidly rising markets—but they can also signal a market shift. A low appraisal may be an early indicator that pricing has peaked or that buyers are becoming more cautious.
Listening to market feedback—even when it’s uncomfortable—can save time and money.
How to Reduce Appraisal Risk in the First Place
For buyers:
Avoid emotional overbidding without understanding appraisal risk
Work with a REALTOR® who knows local comparables
Have a financial buffer if needed
For sellers:
Price based on recent, comparable sales—not headlines
Document upgrades and renovations
Ensure the home shows well for the appraiser
Final Thoughts
A low appraisal doesn’t have to kill a deal—but it does require clear communication, realistic expectations, and smart negotiation. Whether you’re buying or selling, having an experienced REALTOR® who understands local market conditions and lender expectations is critical.
In Spruce Grove, St. Albert, and surrounding communities, appraisal challenges can vary widely by neighbourhood and property type. The right strategy depends on your goals, the market, and the numbers.
If you’re facing a low appraisal—or want to avoid one altogether—professional guidance can make all the difference.