VA appraisals come in below the contract price roughly 6 to 9 percent of the time, about the same rate as conventional and FHA appraisals. Federal Reserve Bank of Philadelphia research covering 1.3 million appraisals put the figure near 6 percent,1Federal Reserve Bank of Philadelphia. Appraising Home Purchase Appraisals and a Fannie Mae study of more than 3 million loan applications from 2013 to 2018 put it at about 8.5 percent.2Fannie Mae. When Appraisers Go Low, Contracts Go Lower Neither study found a meaningful gap between loan types. If yours does come in low, the VA has three protections built into the process: a pre-report warning called Tidewater, a formal Reconsideration of Value, and an escape clause that lets you walk away with your earnest money intact.
What the Numbers Actually Show
The reputation VA appraisals have for coming in low is not borne out by federal data. The Department of Veterans Affairs reported that 91.4 percent of VA appraisals met or exceeded the sales price in fiscal year 2022, and 94.4 percent did so through March 2023.3Department of Veterans Affairs. Recommendations for Improving Appraisal Delivery Times The Philadelphia Fed research found that around 30 percent of appraisals come in exactly at the contract price, with the large majority of the rest coming in above it.1Federal Reserve Bank of Philadelphia. Appraising Home Purchase Appraisals
When VA appraisals do fall short, the reason usually has nothing to do with the loan program. Low appraisals cluster in fast-moving markets where bidding wars drive contract prices ahead of the recorded sales an appraiser has to work from. That pressure affects every loan type equally.
Why an Appraisal Can Come in Below the Contract Price
A VA appraiser’s job is to estimate the property’s “reasonable value” — what a qualified appraiser, free from personal interest or bias, would recommend to a buyer given current market conditions.4eCFR. 38 CFR 36.4301 – Definitions The appraiser reaches that number by comparing the home to similar properties that recently sold nearby, adjusting up or down for differences in size, age, condition, and features.
The final figure reflects what buyers have actually paid for comparable homes, not what a seller is asking or what the market may bear next month. In a rising market, closed sales lag current prices, and that lag is where most low appraisals live.
The Tidewater Warning Before the Report Is Final
Before an appraiser finalizes a report that will come in below the contract price, VA policy requires the appraiser to flag it. Under the Tidewater initiative, the appraiser must contact the designated point of contact — usually the lender’s loan officer or the buyer’s real estate agent — and give notice that the value looks short.5Veterans Benefits Administration. Circular 26-17-18 – Procedures for Improving Communication with Fee Appraisers
The point of contact then has two working days to submit additional comparable sales that might support the contract price. Those sales must be verified closed transactions, presented on a standard comparable sales grid. The appraiser reviews the new data and either adjusts the estimate or issues the final Notice of Value with a written explanation of why the extra sales did not change the outcome.
Tidewater matters because appraisers sometimes miss relevant sales, especially in areas with thin inventory or rapidly changing prices. It closes gaps before the report is official, which is faster and simpler than the formal challenge that follows.
Requesting a Reconsideration of Value
If the Notice of Value still comes in below the contract price, the next step is a formal Reconsideration of Value. The veteran, the real estate agent, or the lender can request one, but the request has to be submitted in writing through the lender.6VA.gov. Reconsideration of Value Request Requirements
There are two ways to make the case:
- Submit better comparable sales. Present them on a standard grid, with sales that are more recent, closer in location, or more similar to the subject property than the ones the appraiser used. Each sale must have closed before the date of the original appraisal report, and you need listing sheets verifying the sold price and any seller concessions.
- Challenge the appraiser’s analysis directly. Provide a written explanation of what the appraiser got wrong — for example, incorrect square footage, a missed renovation, or an inappropriate adjustment — with documentation backing your position.
The lender’s Staff Appraisal Reviewer looks at the request first. That reviewer has limited authority to adjust the value upward, and any adjustment has to be supported by valid market data rather than applied just to save the deal.7eCFR. 38 CFR 36.4347 – Lender Appraisal Processing Program If the requested change is larger than the reviewer can approve, or if the reviewer already made an adjustment in the initial review, the request goes to the VA regional loan center for a final decision. That decision sets the maximum value the VA will use for the loan guarantee, and it is not appealable within the program.
The Escape Clause That Protects Your Earnest Money
Every VA purchase contract has to include the VA Escape Clause. Federal regulations require the language in any contract signed before the veteran receives the Notice of Value.8eCFR. 38 CFR 36.4303 – Reporting Requirements If the appraised value comes in below the contract price, the clause lets you cancel the purchase without losing your earnest money and without any other financial penalty.
The clause also preserves your right to buy the home anyway. If you decide it’s worth paying more than the appraised value, you can go through with the purchase, but you have to cover the gap between the appraised value and the price out of your own funds. The VA loan amount is capped at the lower of the two figures.9VA Home Loans. VA Escape Clause The clause cannot be waived. Even if a seller pressures you to strike it, the VA will not guarantee a loan on a contract that leaves it out.
Your Options When the Value Comes In Short
Once Tidewater and any reconsideration are behind you and the appraised value is still below the contract price, three practical paths remain.
- Ask the seller to lower the price to match the appraised value. The appraisal is leverage: an independent professional has said the home is worth less than the ask. Some sellers split the difference rather than watch the deal collapse.
- Cover the gap yourself. If you have the cash, you can pay the difference between the appraised value and the contract price as an additional down payment. The VA loan is based on the appraised value; the extra comes out of pocket.9VA Home Loans. VA Escape Clause
- Walk away. The escape clause lets you cancel and recover your earnest money with no penalty. This is often the right call when the gap is large, the seller won’t move, and tying up more cash would leave you stretched.8eCFR. 38 CFR 36.4303 – Reporting Requirements
These options aren’t mutually exclusive. A partial price reduction combined with some cash out of pocket is common. Your real estate agent and lender can help you weigh the tradeoffs based on the size of the gap and what you have in reserve.