You wrote a strong offer. It got accepted. Then your lender calls and says the appraisal came in under your purchase price. Your stomach drops.

Take a breath. A low appraisal is one of the most common speed bumps in a home purchase right now, and it almost never means the deal is dead. It means you have a decision to make — and you have more leverage than most buyers realize.

Here’s exactly how this works in Sioux Falls, what your options are, and how to protect the money you’ve already put on the line.

Why appraisals come in low here right now

An appraisal is a licensed appraiser’s opinion of what a home is worth, based mostly on recent comparable sales — “comps” — of similar homes nearby. Your lender orders it because they won’t hand you a loan for more than the home is worth. If you’re putting money down, the loan is based on the appraised value, not your contract price.

The gap shows up when the contract price runs ahead of the closed sales the appraiser can point to. In Sioux Falls, that happens for a few specific reasons.

Prices have moved fast. Home values here climbed roughly 12% over the past year, well above the national pace. When prices rise quickly, closed comps lag behind where the market actually is today. An appraiser working off sales from three months ago is looking at a slower market than the one you just competed in.

You won a bidding war. In the $250,000 to $350,000 range across Tea, Harrisburg, and northwest Sioux Falls, well-priced homes still draw multiple offers. If you beat out four other buyers by going over asking, you may have paid more than the last comparable home sold for — and the appraiser only sees those closed comps.

You’re buying new construction. Builders in Tea and Harrisburg raise base prices as a community fills in. If your contract price sits above what earlier phases closed at, the appraisal can come in short. This is one reason having your own representation matters on a new build — something I covered in whether you need a Realtor for new construction in Sioux Falls.

A real Sioux Falls example

Say you agreed to pay $330,000 for a home in Harrisburg. You’re putting 10% down, so you need a loan of $297,000.

The appraisal comes back at $315,000 — a $15,000 gap.

Your lender will now only lend based on $315,000, not $330,000. Nothing about your loan-to-value math changes for the bank; the shortfall lands on you and the seller to sort out. So what are your actual moves?

Your four options when the number comes in low

Every low appraisal comes down to four paths. The right one depends on how much you want the home, how much cash you have, and how motivated the seller is.

  1. Renegotiate the price down. The cleanest fix. You ask the seller to drop the price to the appraised value — $315,000 in the example above. In a balanced 2026 market, sellers are far more willing to meet you here than they were in 2021 and 2022, because they know the next buyer’s appraisal will likely come back at the same number. If the home’s been sitting or the seller needs to move, this often works.
  2. Bring extra cash to close the gap. You can pay the difference out of pocket, on top of your down payment. In the example, that’s $15,000 in additional cash at closing. This makes sense if you believe in the home’s long-term value and you have the reserves. Just know it’s real money you won’t get back if you sell in a couple of years at the appraised price.
  3. Meet in the middle. The seller comes down some, you bring some cash. If the seller drops to $322,500 and you cover the remaining $7,500, the deal closes and neither side eats the whole gap. This is the most common outcome I see, because it keeps a deal both sides want alive.
  4. Challenge the appraisal with a Reconsideration of Value. If you and your agent believe the appraiser missed better comps or made a factual error — wrong square footage, missed a finished basement, ignored a recent sale two streets over — you can submit a Reconsideration of Value, or ROV, through your lender. An ROV works when you bring specific evidence: actual comparable sales the appraiser overlooked, or documented mistakes. It does not work as a simple “the number feels too low.” Come with data or don’t bother.

And if none of those get you there, you have a fifth path that isn’t really an option so much as a safety net.

Your appraisal contingency is the escape hatch

Most financed purchase agreements in South Dakota include an appraisal contingency. This is the clause that lets you cancel the deal — and get your earnest money back — if the home doesn’t appraise for the contract price and you can’t reach terms with the seller.

This matters because your earnest money is real money on the table. In Sioux Falls, buyers typically put down around 1% of the price, and that deposit sits in the listing brokerage’s trust account, not with a third-party escrow company. If you walk under a valid appraisal contingency, that money comes back to you. If you’d like a deeper look at how deposits work here, I broke it down in how much earnest money you need in Sioux Falls.

Here’s the part that trips buyers up: in a competitive offer, some buyers agree to waive or limit the appraisal contingency to win the home. That can be a smart strategy — but only if you understand you’re agreeing to cover any gap in cash, with no exit. Never waive that contingency without knowing exactly what you’d owe if the number comes in short. That’s a conversation to have before you write the offer, not after the appraisal lands.

What this costs and how long it takes

The appraisal itself is a buyer cost. In Sioux Falls, expect $500 to $600 for a standard single-family home, more for acreage properties near Canistota or Madison where comps are farther apart. That fee is part of your overall closing costs, which usually run 2% to 5% of the purchase price for buyers.

The appraisal typically happens within the first week or two after your offer is accepted, ordered by your lender once you’re under contract and past the inspection window. That timing is deliberate — you’ll usually know your inspection results, including anything like a radon test in your Sioux Falls home, before the appraisal comes back. It gives you a clear picture of the property before the valuation question even comes up.

If you’re stretching your down payment thin, a low appraisal can be especially stressful. That’s another reason to know your assistance options going in — I covered the state programs in down payment help for Sioux Falls first-time buyers.

What I tell my clients

A low appraisal is not a rejection of your judgment. It’s a data point, and it opens a negotiation. The buyers who handle it best are the ones who decided ahead of time how much of a gap they’d cover — and who have an agent ready to pull comps and push for a fair outcome the moment the number comes in.

Your specific move depends on the home, the seller’s situation, and your own cash position. That’s the part no online calculator can answer for you.

Frequently Asked Questions

Who pays for the appraisal in Sioux Falls?

The buyer pays, usually $500 to $600 for a standard Sioux Falls single-family home. Your lender orders it, and you typically cover it at closing or upfront as part of your buyer closing costs.

Is my earnest money refundable if the appraisal comes in low?

Yes, as long as your purchase agreement includes an appraisal contingency and you cancel within the contingency window. Your deposit is held in the listing brokerage’s trust account and returned to you when you exit under a valid contingency.

Can you actually challenge a low appraisal?

You can. You submit a Reconsideration of Value to your lender with factual evidence — comparable sales the appraiser missed or documented errors in the report. ROVs succeed on real comps and facts, not on an opinion that the number is simply too low.

Do new construction homes in Tea and Harrisburg appraise low?

Sometimes. When a builder raises base prices faster than nearby closed sales, or the only comps come from an earlier phase, the appraisal can lag the contract price. Builders such as Allen Homes, Van Buskirk, and Cordes will occasionally adjust price or add incentives if the value comes up short.

What if I can’t cover the gap at all?

If the seller won’t come down and you don’t have the cash to bridge it, you cancel under your appraisal contingency and get your earnest money back. That is exactly the situation the contingency is built to protect.

A low appraisal is a fork in the road, not a dead end. If you’re staring at a gap right now — or writing an offer and want to plan for one before it happens — I’m happy to run the comps and walk you through your options. Call or text me at 605-201-2846, or reach out through siouxfallsgreathomes.wordpress.com.

About Jeff Merrill
Jeff Merrill leads The Jeff Merrill Team, powered by eXp Realty, serving Sioux Falls and the surrounding South Dakota communities of Madison, Mitchell, Canistota, and beyond. He helps motivated buyers, sellers, and new agents cut through the hype in real estate with honest guidance, hands-on mentorship, and a track record of real results. Connect with Jeff at siouxfallsgreathomes.wordpress.com or call 605-201-2846.