How Does the Appraisal Work, and What If It Comes in Low in San Jose? (2026 Guide)

How Does the Appraisal Work, and What If It Comes in Low in San Jose? A 2026 Buyer Guide

After an offer is accepted and earnest money is deposited, one of the most important — and stressful — steps in the buying process is the appraisal.

Buyers often ask:

• “What exactly is an appraisal?”

• “Who orders it?”

• “What if the appraised value comes in lower than the price?”

• “Can the deal fall apart?”

In San Jose, appraisals don’t always behave the way buyers expect — especially in competitive neighborhoods or shifting markets.

This guide explains how the appraisal process works, why appraisals sometimes come in low, and what buyers can do when that happens, so you can move forward confidently in 2026.

For a full overview of the buying process, start here:
👉 https://re38.com/san-jose-home-buying-process-guide

What Is a Home Appraisal?

A home appraisal is an independent opinion of value completed by a licensed appraiser.

The appraiser:

• evaluates the home’s condition

• compares it to recent nearby sales

• considers location, upgrades, and layout

• determines whether the price aligns with market value

Appraisals are required by lenders to ensure they are not lending more than the home is worth.

Who Orders the Appraisal?

If you’re financing the purchase:

• the lender orders the appraisal

• the buyer pays for it as part of closing costs

• the appraiser remains independent from all parties

Buyers and agents cannot choose the appraiser or influence the value.

For financing context, review:
👉 https://re38.com/san-jose-home-loan-mortgage-guide

When Does the Appraisal Happen?

Appraisals typically occur:

• after inspections are completed

• once the loan is in underwriting

• before contingency removal

Timing matters, especially if escrow deadlines are tight.

Why Appraisals Come in Low

A low appraisal doesn’t always mean the home is overpriced.

Common reasons include:

• limited recent comparable sales

• rapidly changing market conditions

• unique or upgraded homes

• multiple-offer situations pushing prices higher

• conservative appraiser assumptions

In San Jose, appraisals often lag the market — especially in desirable neighborhoods.

What Happens If the Appraisal Comes in at Value or Higher

If the appraisal meets or exceeds the purchase price:

• the loan moves forward

• appraisal contingency is satisfied

• escrow continues smoothly

This is the ideal scenario.

What Happens If the Appraisal Comes in Low

If the appraisal comes in below the purchase price, buyers typically have several options:

1. Renegotiate the Price

The buyer can ask the seller to lower the price to match the appraisal.

2. Split the Difference

Buyer and seller agree to meet somewhere in the middle.

3. Increase the Down Payment

The buyer brings additional cash to cover the gap.

4. Challenge the Appraisal

In some cases, the lender may allow a reconsideration of value with better comparable sales.

5. Walk Away

If protected by an appraisal contingency, the buyer can cancel the contract and receive earnest money back.

Understanding contingencies is critical here.

For a full breakdown, see:
👉 https://re38.com/blog/how-do-contingencies-work-inspection-appraisal-financing

How Appraisals Affect Earnest Money

As long as the appraisal contingency is in place:

• earnest money remains protected

• buyers can exit without penalty

Once contingencies are removed:

• earnest money is typically at risk

This is why appraisal timing and strategy matter.

For earnest money context, review:
👉 https://re38.com/blog/what-is-earnest-money-how-much-is-normal-san-jose

How Buyers Can Prepare for Appraisal Risk

Buyers can reduce appraisal risk by:

• understanding current market conditions

• reviewing comparable sales before offering

• structuring smart contingencies

• avoiding emotional overbidding

Appraisal risk is part of buying — but it can be managed.

For offer strategy guidance, see:
👉 https://re38.com/blog/how-much-should-i-offer-on-a-house-san-jose

What This Means in 2026

In 2026:

• appraisals still matter

• markets are more balanced

• buyers have more negotiation room

• pricing accuracy is more important

Low appraisals are no longer rare — they’re part of a normalizing market.

What You Should Do Next

Before making or accepting an offer, it’s important to:

• understand appraisal risk

• know your options

• align expectations with market reality

I help buyers:

• prepare strong offers

• navigate low appraisals

• protect earnest money

• move through escrow confidently

👉 If you want help navigating the appraisal process, reach out here:
https://re38.com/contact

📞 Worried About the Appraisal? Let’s Talk

The appraisal doesn’t have to derail your purchase.

A short conversation can help you understand how appraisals work — and what to do if value becomes an issue.

Zaid Hanna
408-515-1613
www.re38.com