A low appraisal can be one of the most stressful surprises in a real estate transaction. When the appraised value comes in below the agreed-upon purchase price, it creates a gap that needs to be resolved before closing. Here are your three main options when facing a low appraisal on Oahu.

Option one is to renegotiate the purchase price. If the appraisal supports a lower value, you have strong leverage to ask the seller to reduce the price to match the appraised value. Many sellers will agree to this, especially if they understand that most financed buyers cannot easily close above the appraised value. Your agent can present the appraisal findings to the seller's agent and negotiate a price reduction.

Option two is to make up the difference in cash. If you have additional savings and still believe the property is worth the agreed price, you can pay the difference between the appraised value and the purchase price out of pocket. For example, if the home appraised at 750,000 but you agreed to pay 780,000, you would need an additional 30,000 in cash beyond your down payment. This option makes sense if you believe the appraisal undervalued the property or if comparable sales support the higher price.

Option three is to walk away from the deal. If your purchase contract includes an appraisal contingency, you have the right to cancel the transaction and get your earnest money deposit back. This protects you from being locked into paying more than the property is worth. However, losing your dream home can be disappointing, especially in Oahu's competitive market where finding another comparable property may take time.

In some cases, a combination of these options works best. The buyer and seller might agree to split the difference, with the seller reducing the price somewhat and the buyer bringing additional cash to cover the remaining gap.

You can also challenge a low appraisal by requesting a reconsideration of value. Your agent can provide additional comparable sales that the appraiser may have missed, or point out errors in the appraisal report. While not always successful, this approach is worth pursuing if you believe the appraisal was inaccurate.

Kristy and Austin Home Group has extensive experience navigating low appraisals on Oahu. We help our clients evaluate their options and negotiate the best possible outcome in every situation.