What Happens If a Home Appraisal Comes In Low in Sioux Falls?
If your Sioux Falls appraisal comes in below the purchase price, your lender will only loan against the lower appraised value — not what you agreed to pay. You then have four options: renegotiate the price with the seller, cover the gap in cash, request a reconsideration of value with better comps, or walk away using your appraisal contingency and recover your earnest money.
Quick Answer: A low appraisal in Sioux Falls means the lender bases your loan on the appraised value, not the contract price, leaving a gap someone has to cover. Buyers have four moves: renegotiate the price down, pay the difference in cash, ask for a reconsideration of value, or terminate under the appraisal contingency and get earnest money back. Most deals settle by splitting the gap.
By Tyce Ortman — August 15, 2026
You’re under contract, the inspection went fine, and then the appraisal lands below your offer price. It’s one of the most stressful moments in a Sioux Falls transaction — and with the median sale price still climbing near $335,000 while inventory sits about 31% below last year, low appraisals happen when recent comparable sales haven’t caught up to fast-rising prices.
Here’s the key thing to understand: a lender will never loan more than a home is worth. If you agreed to pay $350,000 and the appraisal comes in at $340,000, your lender bases the loan on $340,000. That $10,000 difference — the appraisal gap — has to come from somewhere. The good news is you have real options, and panic isn’t one you need.
Your Four Options When the Appraisal Comes In Low
1. Renegotiate the price with the seller. The cleanest fix is asking the seller to drop the price to the appraised value. Sellers know the next buyer’s lender will likely order an appraisal that lands in the same place, so many will meet you — fully or partway. In practice, splitting the gap is the most common resolution: the seller comes down some, and you cover the rest in cash.
2. Cover the gap in cash. If you want the home and the seller won’t budge, you can pay the difference out of pocket. One approach is to shift money from your down payment to the gap — though that can affect your loan-to-value ratio and possibly your PMI, so run it with your lender first. This is where knowing how much cash you actually need to buy in Sioux Falls ahead of time pays off, because a gap is far less scary when you’ve budgeted a cushion.
3. Request a reconsideration of value. Appraisals aren’t infallible. If your agent can find stronger, more recent comparable sales the appraiser missed — or spot factual errors in the report — you can submit a reconsideration of value asking the appraiser to take a second look. It doesn’t always work, but a well-documented request with solid comps sometimes moves the number.
4. Walk away using your appraisal contingency. If your purchase agreement includes an appraisal contingency, a low value typically lets you terminate the contract and get your earnest money back. That’s exactly why the contingency exists. In South Dakota, your earnest money is held by the title company — First Dakota Title is common locally — and it’s released back to you when you cancel properly under the contingency. If you’re fuzzy on how that deposit works, here’s how earnest money works in Sioux Falls.
The One Scenario Where You Have No Cushion
There’s an important catch. If you waived the appraisal contingency to win a competitive offer, you don’t get to walk away over a low appraisal without consequences. You’ll either have to cover the gap in cash or lose your earnest money by backing out.
That trade-off is worth understanding before you write the offer, not after. Waiving contingencies can make your bid stronger in a multiple-offer situation, but it shifts real risk onto you — the same calculus applies when deciding whether to waive the inspection to win a Sioux Falls offer. Keep the appraisal contingency if you can’t comfortably cover a gap in cash.
What Sellers Should Do
If you’re the seller and the buyer’s appraisal comes in low, you’re not powerless. You can hold firm and hope the buyer covers the gap, split the difference to keep the deal together, or — if the buyer walks — relist knowing the next appraisal will likely mirror this one. The smartest sellers get ahead of it by pricing to defensible comps from the start. A lot of what triggers a low number traces back to what hurts a home appraisal in Sioux Falls, so addressing those issues before listing reduces the odds entirely.
Every low appraisal is its own negotiation, and the right move depends on how badly each side wants the deal, how far off the number is, and what the contract says. This is exactly the kind of moment I walk clients through in real time — because the difference between saving the deal and losing your earnest money often comes down to how you respond in the first 48 hours.
Frequently Asked Questions
Who pays the appraisal gap in Sioux Falls?
It’s negotiable. Most often the gap is split — the seller lowers the price somewhat and the buyer covers the rest in cash. If the buyer waived the appraisal contingency, the buyer is on the hook for the full gap.
Can I get my earnest money back if the appraisal comes in low?
Yes, if your contract has an appraisal contingency and you terminate properly under it. In South Dakota the title company holds your earnest money and releases it back to you when the cancellation is handled correctly. If you waived the contingency, you likely cannot recover it by walking.
How often do appraisals come in low in Sioux Falls?
More often when prices are rising quickly, because recent comparable sales lag behind current offers. With Sioux Falls prices still climbing and inventory tight, gaps show up regularly — but most deals still close after a renegotiation.
Does a low appraisal mean I’m overpaying?
Not necessarily. An appraisal is one professional’s opinion based on recent comps, and in a fast market those comps can trail true value. It’s a signal worth taking seriously, but a reconsideration of value or a look at newer sales sometimes tells a different story.
Can the seller just find another buyer at the higher price?
They can try, but the next buyer’s lender will almost certainly order a new appraisal that lands near the same value. That reality is what brings most sellers to the negotiating table.
A low appraisal feels like a dead end, but it’s really just a negotiation with four clear exits: renegotiate, cover the gap, request a reconsideration, or walk away with your earnest money. Which one is right depends on your contract, your cash, and how much you want the home.
If you’re staring down a low appraisal — or want to write your next offer so you’re protected before one ever happens — I’m happy to walk you through it. Buyers can also grab the free Sioux Falls Buyers Guide to get started. Reach out anytime.
About Tyce Ortman
Tyce Ortman is a residential real estate agent with the Jeff Merrill Team at eXp Realty, serving Sioux Falls, South Dakota and surrounding communities including Brandon, Harrisburg, and Tea. He works with both buyers and sellers, guiding them from first search or listing all the way through closing.
Tyce Ortman | eXp Realty 
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