You finished the rehab. The property looks great. You have a tenant paying rent. Now you're sitting at your desk staring at an appraisal report that values your property $30,000 below what you expected.
This happens more often than most BRRRR guides acknowledge. I've had it happen on three separate deals, and each time required a different response. Here's what I've learned about handling a low appraisal and the options available to you.
Why BRRRR Appraisals Come in Low
Before deciding how to respond, you need to understand why the appraisal missed the mark. The reason matters because it determines your best path forward.
The Appraiser Used Poor Comps
Appraisers are required to use comparable sales from the past 6-12 months within a reasonable distance from your property. In some markets, finding good comps is genuinely difficult. If your property is in a transitional neighborhood, the appraiser might pull comps from a worse area. If you did a high-end renovation in a working-class neighborhood, there might not be any comparable sales that reflect your finish level.
I had a duplex in a neighborhood where most properties had original 1960s kitchens. I put in quartz counters, soft-close cabinets, and stainless appliances. The appraiser couldn't find a single comp with a similar renovation, so he used properties with dated interiors and made minimal adjustments.
Market Timing Worked Against You
Appraisals are backward-looking by design. They use closed sales, which means they're reflecting prices from 3-6 months ago at minimum. If you bought at the peak and values have softened, or if you're in a seasonal market where winter sales dip, the appraisal might reflect old reality rather than current value.
Your ARV Estimate Was Too Optimistic
This is uncomfortable to admit, but sometimes we're the problem. Getting excited about a deal makes it easy to cherry-pick the highest comps, assume maximum rent, and ignore properties that sold for less. If you're consistently getting low appraisals across multiple deals, it might be time to recalibrate how you estimate ARV.
The Appraiser Made an Error
Appraisers are human. Sometimes they miss a bathroom, record the wrong square footage, or fail to account for a permitted addition. I've seen appraisals that listed a property as having one bathroom when it clearly had two.
Your Immediate Options
Once you get a low appraisal, you typically have four paths forward. The right choice depends on how far off the appraisal is, why it's low, and how much capital you have tied up in the deal.
Option 1: Request a Reconsideration of Value
Most lenders allow you to challenge an appraisal through a formal process called a [Reconsideration of Value](https://www.consumerfinance.gov/about-us/blog/mortgage-borrowers-can-challenge-inaccurate-appraisals-through-the-reconsideration-of-value-process/) (ROV). This isn't a complaint or an appeal. It's a structured response where you provide additional information the appraiser may have missed.
To be effective, an ROV needs to include:
Don't just express disagreement. Provide data that makes it easy for the appraiser to justify a higher value. The appraiser has to defend their number to the lender, so give them ammunition.
In my experience, ROVs succeed maybe 30% of the time, and when they do succeed, they usually bump the value by $5,000-15,000, not $50,000. If you're $10,000 short, an ROV is worth attempting. If you're $50,000 short, an ROV alone probably won't solve your problem.
Option 2: Order a Second Appraisal
Some lenders will allow you to pay for a second appraisal from a different appraiser. This costs another $400-600 and takes another 1-2 weeks, but a different appraiser might use different comps and reach a different conclusion.
This works best when:
Be aware that some lenders average the two appraisals rather than using the higher one. Ask your lender about their policy before paying for a second opinion.
Option 3: Bring Cash to Close
If the appraisal is low but you still want to proceed with the refinance, you can bring additional cash to make up the difference. This changes your BRRRR math, but it might still make sense.
Let's say you planned to refinance at 75% of a $200,000 ARV, expecting to pull out $150,000. The appraisal comes in at $180,000, so you can only pull out $135,000 at 75% LTV. You're $15,000 short of your target.
You have a few sub-options here:
Leaving extra equity in a deal isn't the end of the world. It increases your cash flow because your mortgage payment is lower. It just means your capital is deployed less efficiently for your next deal.
Option 4: Walk Away and Regroup
If the numbers no longer work at all, you might need to hold the property longer before refinancing. This is frustrating because it ties up your capital, but forcing a refinance on terrible terms just to free up cash can create a property that bleeds money.
A Worked Example
Here's a real situation I faced on a small multifamily purchase. The numbers have been adjusted slightly for privacy.
The Deal:
The Appraisal:
The appraisal came back at $245,000, which was $35,000 below my expected ARV.
At $245,000 and 75% LTV, I could only pull out $183,750. That meant leaving $26,250 in the deal instead of recycling all my capital.
> Cash left in deal = $210,000 total cost - $183,750 refinance = $26,250
My Response:
I submitted an ROV with three additional comps the appraiser hadn't used. Two were from a parallel street in the same neighborhood with similar unit counts. One was pending sale at the time that had since closed.
The appraiser revised their value to $260,000. Not the $280,000 I wanted, but better.
> Revised cash-out at 75% LTV = $195,000 > Revised cash left in deal = $210,000 - $195,000 = $15,000
I ended up leaving $15,000 in the deal. Not ideal, but the property cash flows $400/month after debt service and reserves. My $15,000 is earning 32% cash-on-cash return, which I can live with.
> Cash-on-cash return = ($400 x 12) / $15,000 = 32%
Common Mistakes When Appraisals Come in Low
Blaming the Appraiser Without Evidence
Venting to your lender about how the appraiser "doesn't understand the market" accomplishes nothing. Appraisers have guidelines they must follow, and lenders have limited ability to override their conclusions. If you want a higher value, you need to provide data, not opinions.
Using Zillow Estimates as Proof
Zillow's Zestimate is not evidence of value. Neither is Redfin's estimate or any other automated valuation model. Appraisers know these tools exist and know their limitations. Citing them in an ROV makes you look like an amateur.
Waiting Too Long to Refinance
Some investors hold off refinancing because they're "waiting for values to go up." Meanwhile, they're paying hard money interest at 12% or have private capital sitting idle. Every month you wait has a cost. Run the math on what that delay is actually costing you before deciding to wait.
Overimproving for the Neighborhood
This mistake happens before the appraisal, but it's worth mentioning. Putting a $50,000 kitchen in a $150,000 house doesn't make it a $200,000 house. Appraisers cap adjustments for improvements based on what the market will actually pay. If you're the nicest house on the block by a wide margin, you're going to have appraisal problems.
How to Prevent Low Appraisals on Future Deals
Get a Broker Price Opinion Before You Close
After rehab is complete but before ordering your refinance appraisal, have a real estate agent run comps and give you an informal value opinion. This costs nothing or very little, and it can reveal problems with your ARV estimate before you're committed to a refinance timeline.
Build Relationships with Your Lender
Lenders who specialize in BRRRR deals often have more flexibility with appraisal issues. They may allow desk reviews, second appraisals, or have appraisers on their panel who understand investment property valuation. A transactional lender treats you like a number. A relationship lender might work with you.
Document Your Renovations Thoroughly
Before and after photos, permit records, contractor invoices, and scope of work documents all help appraisers understand what was done. If you hand the appraiser a packet showing the property transformation, they can better justify value adjustments for improvements.
Be Conservative on Your ARV
I now use the median of my comparable sales rather than the average, and I throw out the highest comp entirely. If my analysis shows an ARV range of $240,000-280,000, I underwrite to $250,000 or $255,000, not $280,000. This builds in a cushion for appraisal risk.
Running Your Own Numbers
A low appraisal forces you to recalculate everything: your loan amount, your cash left in the deal, your cash-on-cash return, and whether the deal still makes sense. The [single-family rental calculator](/tools/single-family) lets you model different scenarios quickly, so you can see exactly what happens to your returns if the appraisal comes in $20,000 or $40,000 below target.
The reality of BRRRR investing is that not every deal goes according to plan. The investors who build portfolios aren't the ones who never face problems. They're the ones who know how to respond when problems happen.