Appraisal Came In Low: What Happens Next in Texas

A low appraisal does not cancel your contract, and it does not automatically let you out of it. In a Texas resale deal written on the standard promulgated forms, the appraisal usually runs through one clause — Property Approval, paragraph 2B of the Third Party Financing Addendum — and using that clause takes two things most buyers do not have on hand: a written statement from the lender, and room left on the calendar. But a second TREC form may give you a separate and easier right, and your option period may still be open, so the first thing to do is read your contract’s list of addenda. Below is how the clause actually works, what your right to a copy of the appraisal is, and why the one request that can change the number can only be made by your lender.

What the appraisal is for, and who it belongs to

The lender orders the appraisal, and the appraiser is answering the lender’s question: is this property worth enough to secure this loan on these terms. It is not a survey, not a warranty, and not a shopping report written for you.

You still pay for it. On the current One to Four Family Residential Contract (Resale), TREC No. 20-19, the appraisal sits at the top of the list of Buyer’s Expenses in paragraph 12A(2). Paying the fee does not make the appraiser your consultant, and that single fact explains most of the frustration buyers feel when the number disappoints them.

An appraisal is also not an inspection. They are two different reports, bought for two different reasons, and one does not substitute for the other — our walkthrough of what happens during a home inspection covers what the second one buys you.

Nobody on the deal is allowed to lean on the appraiser

Federal rules put a wall around the appraiser’s judgment. Under Regulation Z, 12 C.F.R. 1026.42, in a transaction secured by the buyer’s principal dwelling, no creditor and no settlement-service provider may try, directly or indirectly, to cause the assigned value to be based on anything other than the appraiser’s independent judgment — through coercion, extortion, inducement, bribery or intimidation, through compensation or instruction, or through collusion. A second home or an investment property sits outside this particular section, though appraisal standards and state law still apply.

The regulation gives examples of what crosses the line, including seeking to influence an appraiser to report a minimum or maximum value, withholding or threatening to withhold payment because the value did not come in at or above a certain amount, implying that future work depends on the number, dropping an appraiser from future consideration for reporting a value below a threshold, and conditioning the appraiser’s pay on the deal closing.

It has teeth on the lender’s side too. Under 1026.42(e), a creditor that knows of such a violation at or before consummation may not extend credit based on that valuation unless it documents that it acted with reasonable diligence to determine that the valuation does not materially misstate or misrepresent the value.

So no, your agent cannot phone the appraiser and ask for a bigger number. It is a common question, and the answer is that it would be the one move guaranteed to make things worse.

What the regulation says is allowed

The same regulation lists actions that do not violate those prohibitions, and this list is where the real work happens. Under 1026.42(c)(3), it is permitted to:

• ask the appraiser to consider additional, appropriate property information, including information about comparable properties, to make or support a valuation;
• request further detail, substantiation, or explanation for the conclusion about value;
• ask the appraiser to correct errors in the valuation; and
• obtain multiple valuations in order to select the most reliable one;
• withhold compensation for breach of contract or substandard performance of services; and
• take any action permitted or required by applicable federal or state statute, regulation, or agency guidance.

Two things are worth noticing. The regulation calls these examples of actions that do not violate the prohibitions, so the list is illustrative rather than closed. And the last item is the provision that the lender’s own reconsideration process rests on.

Read them together and the lawful path is obvious: evidence, not pressure. A short, factual package of closed sales beats an indignant phone call every time, because the first one is on the permitted list and the second one is not.

Your right to a copy — and the deadline that gives it teeth

Buyers routinely assume the appraisal is the lender’s private document. It is not. Under Regulation B, 12 C.F.R. 1002.14(a)(1), a creditor must give you a copy of all appraisals and other written valuations developed in connection with an application for credit secured by a first lien on a dwelling. The timing is specific: promptly upon completion, or three business days before closing, whichever is earlier.

Three further pieces of that rule are worth knowing, because they are the ones most often left out:

• You get told about the right up front. Under 1002.14(a)(2), the creditor must mail or deliver written notice of your right to receive a copy no later than the third business day after it receives your application.
• The copy itself is free. Under 1002.14(a)(3), a creditor may not charge you for providing the copy, though it may require a reasonable fee to reimburse the cost of the appraisal itself.
• A dead deal does not forfeit it. Under 1002.14(a)(4), the requirement applies whether credit is extended or denied, and whether the application is incomplete or withdrawn. If your loan is turned down or you walk away, the copy is still owed to you.

You may waive the timing and agree to receive a copy at or before closing instead, but the waiver has to be obtained at least three business days before closing. And if you waive and the sale then falls through, the creditor still has to provide the copies no later than 30 days after it determines the closing will not happen.

Two limits to keep straight. The rule turns on lien position, not on what the loan is called: it applies to an application for credit secured by a first lien on a dwelling. A second mortgage, or a home equity line sitting in second position, falls outside 1002.14(a)(1) — but a home equity line in first position is inside it, and for open-end credit the rule measures the deadline from account opening rather than from closing. And “dwelling” is defined broadly in 1002.14(b)(2) — a one-to-four unit residential structure, whether or not it is attached to real property, including an individual condominium or cooperative unit and a mobile or other manufactured home.

Practical version: read the report the day it lands. Every clock described below is already running.

The number on your tax notice is a different number

Appraisal district notices come up often in this conversation, usually produced as proof that a house is worth more than the appraisal said. That does not work, and the reason is in the statute.

Texas Tax Code 23.01(a) requires that, except as otherwise provided by that chapter, all taxable property be appraised at its market value as of January 1. Chapter 23 is largely built out of those exceptions, which is one reason a county notice can read below what a house would actually sell for. Section 23.01(b) requires generally accepted appraisal methods, and where a district uses mass appraisal standards those standards must comply with the Uniform Standards of Professional Appraisal Practice — while still requiring each property to be appraised on the individual characteristics that affect its market value, taking into account all available evidence specific to that property.

So the two numbers answer different questions as of different dates, and one of them is produced for taxation. A notice from the Tax Appraisal District of Bell County is not evidence for your lender and is not a second opinion on your house. It is also outside the appraiser board’s jurisdiction entirely: the Texas Appraiser Licensing and Certification Board does not regulate property tax assessments, and property tax consultants are regulated by the Texas Department of Licensing and Regulation.

What the contract lets you do: Property Approval

If the purchase is financed, the appraisal contingency is almost certainly the Third Party Financing Addendum, TREC No. 40-11, carrying a revision date of 11-04-2024 and replacing the older 40-10. Check which revision is attached to your own contract before relying on any summary, including this one.

Paragraph 2 splits lender approval into two separate things, and conflating them is the most common and most expensive mistake buyers make.

Paragraph 2B, Property Approval, is the one that covers the appraisal. If the buyer’s lender determines that the property does not satisfy the lender’s underwriting requirements for the loan — “including but not limited to appraisal, insurability, and lender required repairs” — the buyer may terminate the contract on or before the 3rd day before the Closing Date by giving the seller two things: notice of termination, and a copy of a written statement from the lender setting forth the reasons for the lender’s determination. If the buyer terminates that way, the earnest money is refunded. If the buyer does not terminate under that paragraph, Property Approval is deemed to have been obtained.

Paragraph 2 also states that time is of the essence and that strict compliance with the time for performance is required. There is no weekend or holiday extension written into that deadline.

One thing does work in your favor on timing. Under paragraph 21 of the resale contract, notices must be in writing and are effective when mailed to, hand-delivered at, sent by overnight courier to, or transmitted by electronic transmission to the other party or their agent. Effective when sent, in other words — not when the seller gets around to reading them. An email on the deadline day is timely.

And before reaching for any of this, check whether your option period is still running. Paragraph 5B of the resale contract gives the buyer an unrestricted right to terminate by giving notice to the seller within the number of days written into the blank, with notices under that paragraph due by 5:00 p.m. local time on the date specified. While that window is open it is the simplest exit available: no reason required, no lender statement, no appraisal. The earnest money is refunded; the option fee is not.

Here is the part that makes this an agent-and-lender problem rather than a paperwork problem. The second item — the lender’s written statement — is not a document you or your agent can produce. Only the lender can write it. If the value comes in short, the request for that statement should go out the same day, because the clause is useless without it no matter how clearly you have decided to terminate.

Paragraph 2A, Buyer Approval, is a different clause about a different subject, and it turns on two things: whether the terms of the loan described in paragraph 1 are actually available, and whether the lender finds you have satisfied its requirements for your assets, income and credit history. Either one failing means Buyer Approval has not been obtained — so if the rate ceiling or the origination cap written into paragraph 1 is no longer available, that prong can fire for a borrower with spotless credit. It has its own day count measured from the Effective Date, and terminating under it also requires a written statement of the lender’s reasons. Once that window closes, the contract is no longer subject to Buyer Approval — but Property Approval is normally still live, which is why a buyer long past the financing deadline can still have an appraisal remedy, unless it was waived on the form described next.

	2A — Buyer Approval	2B — Property Approval
What it tests	Whether the paragraph 1 loan terms are available, and you: assets, income, credit history	The property: appraisal, insurability, lender required repairs
Deadline	A number of days after the Effective Date, written into the blank	On or before the 3rd day before the Closing Date
What you must deliver	Notice of termination plus the lender’s written statement of reasons	Notice of termination plus the lender’s written statement of reasons
Earnest money	Refunded on timely termination	Refunded on timely termination
If you do nothing	Contract is no longer subject to Buyer Approval	Property Approval is deemed obtained

The other form: TREC No. 49-1

Paragraph 22 of the resale contract lists the addenda that can be attached, and one of them is the Addendum Concerning Right to Terminate Due to Lender’s Appraisal, TREC No. 49-1, revision date 11-15-18. It is used only where the Third Party Financing Addendum is attached and the transaction does not involve FHA insured or VA guaranteed financing, and it is a single checked box out of three. Which box, or whether the form is attached at all, changes your position more than anything else in this article.

• (1) Waiver. The buyer waives the right to terminate under paragraph 2B where Property Approval is not obtained because the opinion of value does not satisfy the lender’s underwriting requirements. If the lender then reduces the loan because of that value, the cash portion of the sales price increases by the amount of the reduction. In plain terms, you have agreed to cover the gap.
• (2) Partial waiver. The same waiver, but it only bites if the opinion of value comes in at a dollar figure written into the blank or higher. Below that figure your 2B right survives.
• (3) Additional right to terminate. A separate right sitting on top of 2B. The buyer may terminate within a number of days after the Effective Date if the appraised value obtained by the lender is less than a stated figure and the buyer delivers a copy of the appraisal to the seller. The earnest money is refunded.

Option (3) is worth reading twice, because of what it does not require. There is no lender’s written statement of reasons in it — the appraisal itself is the document you deliver. It runs on a value threshold rather than on an underwriting determination, and its clock is measured from the Effective Date rather than from the Closing Date. For a buyer who negotiated it into the deal, it is a cleaner exit than 2B.

The waiver boxes deserve the same attention in the other direction. There is a parallel waiver inside the financing addendum itself: paragraph 1G, covering other financing, carries a box reading that the buyer does or does not waive all rights to terminate under paragraph 2B. An appraisal remedy you assume you have may have been signed away when the offer was written.

FHA and VA buyers sit in their own paragraph

Paragraph 4 of the financing addendum, the FHA/VA Required Provision, works differently and it is easy to miss. Where FHA insured or VA financing is involved then, notwithstanding any other provision of the contract, the buyer is not obligated to complete the purchase or to incur any penalty by forfeiture of earnest money deposits or otherwise: unless the buyer has been given, in accordance with HUD/FHA or VA requirements, a written statement issued by the Federal Housing Commissioner, the Department of Veterans Affairs, or a Direct Endorsement Lender setting forth the appraised value of the property of not less than a dollar figure written into the blank — or if the contract purchase price or cost exceeds the reasonable value established by the Department of Veterans Affairs.

Two phrases in there are doing real work. “Notwithstanding any other provision of this contract” means this paragraph overrides the rest of the agreement. “Or otherwise” means the protection is against any penalty, not only the loss of earnest money.

The form then says something that is genuinely important and routinely overlooked: “The 3-day notice of termination requirement in Paragraph 2B does not apply to this Paragraph 4.” The appraisal timing that governs a conventional buyer is not the timing that governs this provision.

Three more details from that paragraph:

• Paragraph 4A preserves the buyer’s “privilege and option” of going ahead with the purchase without regard to the appraised valuation or the VA’s reasonable value. A low number is information, not an instruction.
• Paragraph 4B notes that an FHA appraised valuation is arrived at to determine the maximum mortgage HUD will insure, that HUD does not warrant the value or the condition of the property, and that the buyer should satisfy himself or herself that the price and the condition of the property are acceptable.
• Paragraph 4C covers the VA gap two ways. A buyer who elects to close above the VA’s reasonable value pays the excess in cash from a source the buyer discloses to the VA and represents will not be borrowed funds except as approved by the VA. Separately, where the VA reasonable value is less than the sales price, the seller may reduce the sales price to the VA reasonable value and close at the lower price with proportionate adjustments to the down payment and loan amount — may, not must.

Because that dollar figure in paragraph 4 is a blank filled in when the offer is written, it is worth asking what went into it before you sign. Our guide to VA loans in Bell County covers the rest of that process, including the Notice of Value and minimum property requirements.

Reconsideration of value: only your lender can ask

If you think the appraisal got something wrong, there is a formal route — and a hard limit on who may use it.

The Texas Appraiser Licensing and Certification Board, the state board that licenses appraisers and appraisal management companies, is explicit that it does not mediate value disputes. In its own words, it cannot investigate complaints solely about value, it will not provide another appraisal on your property, and it cannot order an appraiser to redo or correct an appraisal.

What it points consumers to instead is a reconsideration of value: a request to the appraiser to reconsider the analysis and conclusions based on additional information. And it states the limit plainly — in mortgage finance transactions, only your lender can request a reconsideration of value. The board’s guidance is to reach out to your lender to learn their process for submitting one.

You can start this yourself: ask your lender what their reconsideration-of-value process is, and submit the material through it. Where an agent earns a place in the process is the evidence — access to closed sales and the kind of local detail that is awkward to assemble from public records. Either way the lender is the one who carries it to the appraiser, and the deadline in paragraph 2B does not pause while two offices work out who is doing what.

What belongs in that package, practically: closed sales rather than active listings, the closest match you can find on age, size and lot, sales from the same platted section where the subdivision has more than one, and any plain factual correction — wrong square footage, wrong bedroom or bathroom count, a permitted addition that was not counted. A reconsideration is not an appeal of someone’s opinion. It is a request to look at facts that were not in front of them.

Why comps behave differently in a newer subdivision

An appraiser leans on recent closed sales of similar homes nearby. In an established neighborhood there is usually a deep record of ordinary resales to draw on. In a subdivision still being built out, a large share of the nearby closed sales are builder sales — and a builder’s incentives, such as a rate buydown, paid closing costs or included upgrades, do not always show up in the recorded price. Two houses can close at the same number without having traded on the same terms.

Platted sections matter for the same reason. A single marketing name at the entrance can cover several separately recorded sections with different lot sizes, different build years and different association documents, so “the same neighborhood” is not always one dataset.

None of this is a reason to avoid new construction. It is a reason to know which kind of area you are writing an offer in, so the appraisal is not a surprise. If you are weighing an established part of town against one of the newer build-outs, it helps to see which parts of west Temple are recent build-outs and which are long-established on our Temple Dream Homes site before the offer goes out, rather than after the report comes back.

What an appraiser complaint can and cannot do

Occasionally the issue is conduct rather than the number. The appraiser board does investigate violations of the Texas Appraiser Licensing and Certification Act, the Texas Appraisal Management Company Registration and Regulation Act and the board’s own rules, noncompliance with the Uniform Standards of Professional Appraisal Practice, and unlicensed appraisal activity.

It does not handle several things people bring to it. Disputes solely about value are out, as noted above. So are business practice and customer service complaints. Broker price opinions are regulated by the Texas Real Estate Commission, not the appraiser board. Evaluations are regulated by the federal banking agencies, and the board directs those complaints to the FDIC, the Office of the Comptroller of the Currency or the Federal Reserve Board depending on how the bank is chartered.

One duty runs the other way, and it is worth knowing about. Under 12 C.F.R. 1026.42(g), a covered person who reasonably believes an appraiser has not complied with the Uniform Standards of Professional Appraisal Practice, or with ethical or professional requirements under applicable state or federal law, shall refer the matter to the appropriate state agency if the failure to comply is material — material meaning likely to significantly affect the assigned value. The agency is the one for the state where the dwelling is located. So if what you have found is a genuine standards problem rather than a disagreement about value, put it to your lender in writing and ask whether that provision applies.

Three practical limits if you do file. The alleged violation must have occurred within the previous four years, which is a longer window than most people assume. The board cannot investigate an unsigned or anonymous complaint. And it cannot get you financial compensation, order another appraisal, or give an opinion of value on your home.

Two procedural points. Where a complaint alleges discrimination and is referred to the Texas Workforce Commission Civil Rights Division, the board may abate — pause — its own investigation. And open complaints are confidential under Texas law: you can be given the status of your complaint, and case information becomes available by public information request once a complaint is closed. Resolution times vary with the complexity of the case.

The short version: a complaint is a tool for addressing conduct. It is not a tool for changing a number before closing. The reconsideration route above is the one aimed at the number.

A checklist for the week of the appraisal

• At application, confirm you received the written notice of your right to a copy, and ask when the copy itself will arrive.
• Read paragraph 22 of your contract and see whether the Addendum Concerning Right to Terminate Due to Lender’s Appraisal is attached, and which of its three boxes is checked.
• Check whether your option period under paragraph 5B is still open. If it is, that is your simplest route out.
• Write the Closing Date on the calendar, then mark the third day before it. That is the outside edge of the Property Approval clause.
• Make sure the appraiser can get in and the utilities are on. A trip that cannot be completed costs days you may need later.
• Have the survey, the platted section name and the dates of any permitted work ready to hand over.
• If the value comes in short, ask the lender the same day for the written statement paragraph 2B requires, and ask what their reconsideration of value process is. Those are two separate requests, and you may want both.
• Decide what you would actually do at each outcome before the report arrives, not after.

Common questions

Does a low appraisal mean I overpaid? It means one licensed appraiser’s opinion of market value, developed for lending purposes, came in below the price you agreed. That is useful information and it is worth taking seriously, but the contract treats it as a condition of the loan rather than a verdict on your judgment — paragraph 4A spells out for FHA and VA buyers that proceeding anyway remains the buyer’s option.

Can the seller be made to lower the price? No. Nothing in the resale contract or the financing addendum obliges a seller to reduce the price because an appraisal came in low. The one place the forms mention a reduction is paragraph 4C, where a seller may reduce the sales price to the VA’s reasonable value — and that is permissive.

Can I just bring the difference in cash? Often that is the simplest fix, and your lender will tell you how it affects the loan amount and the down payment. On a VA loan, paragraph 4C adds conditions: the excess is paid in cash from a source you disclose to the VA and represent will not be borrowed funds, except as approved by the VA.

My loan was denied. Do I still get the appraisal I paid for? Yes. Regulation B applies whether credit is extended or denied and whether the application is incomplete or withdrawn.

Can I order a second appraisal? Obtaining multiple valuations to select the most reliable is on Regulation Z’s list of permitted actions, so the idea is not improper in itself. Whether your loan program and your lender will order a second one and underwrite to it is a lender decision, and the answer varies. Ask before you spend the money.

How long does the appraisal take? That depends on appraiser availability in the market at the time, so we will not put a number on it here. It is a fair question to put to your lender at application, because the answer shapes how much room paragraph 2B leaves you.

Talk it through with both halves of the team

Appraisal problems get solved by the agent and the lender working the same file at the same time — one assembling the sales evidence and the local detail, the other carrying it to the appraiser and writing the statement the contract requires. If you have an appraisal coming up, or one that has just come in below your contract price, call us at (254) 295-3582 or email nicole@jdwalters.net and we will get both sides of it on one call with you.

Sources

• Third Party Financing Addendum, TREC No. 40-11 (rev. 11-04-2024); Addendum Concerning Right to Terminate Due to Lender’s Appraisal, TREC No. 49-1 (rev. 11-15-18); and One to Four Family Residential Contract (Resale), TREC No. 20-19 — Texas Real Estate Commission.
• 12 C.F.R. 1002.14, Regulation B rules on providing appraisals and other valuations.
• 12 C.F.R. 1026.42, Regulation Z valuation independence, including the permitted actions in 1026.42(c)(3).
• Texas Tax Code 23.01 — Texas Legislative Council.
• Filing a complaint and reconsideration of value guidance — Texas Appraiser Licensing and Certification Board.

Reviewed October 4, 2026 by the Twins Realty Team, 354 Green Hollow Dr STE 110 UNIT A, Temple, TX 76502. This article explains general contract and regulatory mechanics and is not legal advice. TREC promulgates revised forms periodically, so confirm the form and revision date on your own contract, and verify anything your decision depends on.