What Happens If the Appraisal Comes in Low in Texas? A San Antonio Guide (2026)

By Chris Dudley, San Antonio REALTOR® and founder of Legacy Realty Group, brokered by Real Broker, LLC (TREC #731381).

When a buyer uses a mortgage, the lender orders an appraisal. If the appraiser's opinion of value comes in below the contract price, the lender generally lends based on the lower number, and someone has to solve the gap. In Texas, what each side can do depends mostly on how the TREC contract forms were filled out. Here is how it works for buyers and sellers in San Antonio.

1. Check the Third Party Financing Addendum

Most financed sales in Texas use the TREC Third Party Financing Addendum (TREC No. 40-11). It splits lender approval into Buyer Approval (income, assets, credit) and Property Approval. Property Approval covers the lender's underwriting of the home itself, "including but not limited to appraisal, insurability, and lender required repairs."

If the lender determines the property does not meet its requirements, the buyer may terminate on or before the 3rd day before the Closing Date by giving the seller notice and a copy of the lender's written statement of reasons, and the earnest money is refunded. If the buyer does not terminate under that paragraph, Property Approval is deemed obtained.

2. Check whether the appraisal addendum was used

Many San Antonio offers also include the TREC Addendum Concerning Right to Terminate Due to Lender's Appraisal (TREC No. 49-1). It gives three choices:

• Waiver: the buyer gives up the right to terminate under Property Approval because of a low appraisal. If the lender reduces the loan, the cash the buyer brings to closing goes up by the same amount.
• Partial waiver: the buyer waives that right only if the appraisal comes in at or above a dollar amount written into the addendum. Below that amount, the buyer keeps the right to terminate.
• Additional right to terminate: the buyer may terminate within a set number of days after the Effective Date if the lender's appraisal is below a stated amount, by giving notice and a copy of the appraisal to the seller. The earnest money is refunded.

Because these choices are negotiated up front, a waiver can make an offer stronger in a competitive situation, but it also means the buyer needs cash to cover a possible gap. Read the deadlines on your own forms; time limits in these addenda are strict.

3. FHA and VA loans have their own rule

The financing addendum includes a required FHA/VA provision: the buyer is not obligated to complete the purchase or lose earnest money if the FHA or VA appraised value is below the amount stated in the contract. The buyer may still choose to proceed. With VA financing, if the buyer goes ahead above the VA's reasonable value, the difference is paid in cash. If the VA value is lower than the price, the seller may reduce the price to that value and the sale closes at the lower price. See my VA loan guide and FHA guide.

4. The usual ways to close the gap

1. Renegotiate the price. The seller lowers the price to the appraised value or meets the buyer partway.
2. Buyer covers the difference in cash, which is required under a full waiver.
3. Split the difference, sometimes paired with a change in seller-paid costs.
4. Ask for a reconsideration of value. Since late 2024, HUD, Fannie Mae and Freddie Mac require lenders to have a process for borrower-initiated reconsiderations of value and to tell borrowers how it works, at application and again when the appraisal is delivered. A request usually works best when it points to factual errors or better comparable sales.
5. Terminate, if the contract still gives the buyer that right and the deadline has not passed.

For sellers

A low appraisal is not automatically the end of a sale. Before agreeing to a price cut, look at which addenda the buyer signed, whether the buyer still has a right to terminate, and whether the comparable sales support your price. Pricing well from the start is the best protection; see how to price your San Antonio home.

FAQ

Can a Texas buyer back out if the appraisal is low?

Often yes, through Property Approval in the TREC Third Party Financing Addendum or the additional right to terminate in TREC No. 49-1, but not if the buyer waived that right. Deadlines matter.

Does the seller have to lower the price?

No. The seller can lower the price, hold firm or negotiate a split. If the buyer has a right to terminate and uses it, the earnest money is generally refunded under those paragraphs.

Can the appraisal be challenged?

The buyer can ask the lender for a reconsideration of value through the lender's required process, usually with corrections or additional comparable sales.

This page is general information, not legal advice. Read your own contract and addenda, and ask a Texas real estate attorney about your specific situation.

Talk it through

If you are writing an offer or facing a low appraisal right now, call Chris Dudley at (210) 838-6099. More: FAQ | About Chris | Option period and inspections.

Chris Dudley, REALTOR® | Founder, Legacy Realty Group | Brokered by Real Broker, LLC | TREC #731381 | 8626 Tesoro Dr, Suite 208, San Antonio, TX 78217.