A signed contract sets the price, but the lender lends against a valuation it commissions itself. When those two numbers disagree, the transaction has to absorb the difference somewhere.
The lender sizes the loan from the appraisal
Loan-to-value is calculated using the lower of the contract price and the appraised value, which means a low appraisal reduces the maximum loan.
The appraiser works for the lender rather than the buyer, and independence requirements keep the parties to the sale from influencing the result.
Because the constraint is regulatory and internal rather than negotiable, the lender cannot simply agree to lend more because the buyer is willing to pay it.
The gap has to be filled with cash
If the appraisal falls short, the buyer must contribute the difference on top of the planned down payment to keep the loan size viable.
That cash is additional equity in a property the appraiser has just said is worth less, which is a difficult proposition for many buyers.
Buyers who stretched to make the offer frequently do not have it, which is where deals collapse rather than merely slow down.
Appraisals lag fast-moving markets
Valuation relies on comparable sales that have already closed, so the data describes a market that existed weeks or months earlier.
In a rising market with limited inventory, recent contract prices can run ahead of the closed sales available to support them.
The appraiser is not disputing what buyers will pay; the method simply cannot count transactions that have not yet settled.
Contract terms decide who absorbs the shortfall
An appraisal contingency lets the buyer renegotiate or withdraw without losing the deposit, which places the risk on the seller.
Waiving that contingency, or agreeing in advance to cover a gap up to a stated amount, makes an offer far stronger in a competitive situation.
Sellers weigh those terms alongside price, which is why the highest offer is not always the one accepted.
Reconsideration is possible but narrow
Lenders will accept a request to review a valuation where relevant comparable sales were missed or a factual error appears in the report.
Disagreement with the conclusion is not itself grounds for revision, and the appraiser is under no obligation to change an opinion.
Ordering a second appraisal is generally not permitted for the same loan, so the realistic outcomes are a price reduction, extra cash, or termination.