What happens if your Denver home appraises below the contract price?
A low appraisal on a Denver home opens a short negotiating window in the Colorado contract. What you do before the Appraisal Objection Deadline decides whether the deal holds.
Here's an example of how it lands. You're under contract on a Denver home at $600,000, putting 20% down. You planned on $120,000 in cash and a $480,000 loan. Then the appraisal comes back at $580,000.
Your lender sizes the loan off the lower of the price or the appraised value. At 80% of $580,000, the most you can borrow at the same down payment percentage is $464,000. To close at $600,000, you'd now need $136,000 in cash. That's $16,000 nobody budgeted for, and the contract's clock is already running.
The seller has a problem too. If the buyer walks away on time, the earnest money goes back to the buyer and the house goes back on the market. This post walks through how the Colorado contract handles a low appraisal, the paths buyers and sellers usually take, and the deadlines that matter more than the number itself.
How the Colorado Contract Handles a Low Appraisal
Most Denver Metro purchases use the Colorado Real Estate Commission's Contract to Buy and Sell Real Estate (Residential), and the current version has been mandatory since January 1, 2026. You can find it on the Colorado Division of Real Estate forms page.
Section 3 of the contract sets three appraisal dates, and the parties fill them in when they write the deal:
- Appraisal Deadline: when the appraisal should be in hand.
- Appraisal Objection Deadline: the last day the buyer can act on a low or missing appraisal.
- Appraisal Resolution Deadline: the last day to reach a written agreement.
For a conventional loan or a cash purchase, Section 6.2.1 says that if the appraised value is less than the purchase price, or the appraisal isn't received by the Appraisal Deadline, the buyer may do one of two things on or before the Appraisal Objection Deadline:
- Terminate by written notice to the seller.
- Object by delivering a written objection with either a copy of the appraisal or written notice from the lender confirming the value came in low.
What Happens If Nobody Agrees
This is the part buyers and sellers in Denver should know cold. Under Section 6.2.1.3, if the seller receives an Appraisal Objection and the two sides haven't agreed in writing by the Appraisal Resolution Deadline, the contract terminates on that deadline. The only way to keep it alive is for the buyer to deliver a written withdrawal of the objection before the deadline passes.
If the buyer terminates on time, Section 4.3.2 entitles the buyer to the return of earnest money as the contract provides.
FHA and VA Loans Work Differently
FHA and VA purchases get their own sections. Section 6.2.2 carries the FHA amendatory clause, which says the buyer isn't obligated to complete the purchase or forfeit earnest money unless the appraised value is at least a stated amount. Section 6.2.3 says a VA buyer won't forfeit earnest money if the price exceeds the reasonable value set by the Department of Veterans Affairs. In both cases, the buyer can still choose to go forward.
The Usual Ways a Low Appraisal Gets Resolved
Once the objection is on the table, most Denver deals land in one of these places:
- The seller lowers the price to the appraised value. The buyer's loan math works again.
- The buyer covers the gap in cash. In the example above, that's $16,000 more at closing.
- The two sides split the difference. A partial price reduction plus extra cash from the buyer.
- The buyer asks for a reconsideration of value. More on that below.
- The contract ends. The buyer terminates on time, or the Appraisal Resolution Deadline passes without an agreement.
If any agreement changes the price, it goes in writing before the Appraisal Resolution Deadline. If the lender needs more time, both sides can sign an amendment to extend the deadline.
Challenging the Appraisal
You have a right to see the appraisal. Under federal rules the lender has to give you a copy promptly when it's completed, or at least three business days before closing, whichever is earlier, according to the CFPB's valuation fact sheet.
If the appraisal missed a recent sale or got a feature wrong, you can ask the lender for a reconsideration of value. Federal banking agencies, including the CFPB, issued guidance on this process on July 18, 2024. For loans sold to Fannie Mae with applications dated on or after October 31, 2024, lenders must have a borrower-initiated process. Fannie Mae's Selling Guide allows one borrower-initiated request per appraisal, with no more than five additional comparable sales.
A reconsideration isn't a guaranteed fix, and it takes time. Ask for it early so it fits inside your Appraisal Resolution Deadline.
Appraisal Gap Language
The standard Colorado contract has no appraisal gap clause. Agents who use one write it into the Additional Provisions section, which the form itself notes has not been approved by the Colorado Real Estate Commission.
The Division of Real Estate has written about appraisal gaps. It calls covering one "a very complicated and expensive proposition" and recommends getting advice from a licensed real estate agent or attorney. If you're a buyer offering to cover a gap, put a dollar cap on it and confirm you have the cash.
If You're the Seller
A low appraisal is the seller's problem as much as the buyer's, because the buyer's right to walk away comes with the earnest money. Before you refuse to move on price, think through what happens next. The next buyer's lender will order its own appraisal, and you'll be back on the market with time already spent.
There are better moves than a flat no:
- Send comparable sales the appraiser may have missed, so the buyer's lender can consider them.
- Offer a partial reduction that keeps the buyer's cash needs realistic.
- Check Section 6.4. It shows whether the buyer or the seller agreed to pay for the appraisal.
Jamie Bridges, a REALTOR® with Keller Williams Realty DTC, works with buyers and sellers across the Denver Metro area, from Denver and Aurora to Centennial, Littleton, and Castle Rock. His approach to appraisal risk in Denver starts before the offer: set realistic appraisal deadlines, know the recent sales the appraiser is likely to use, and agree on a plan for a low number before one shows up.
Frequently Asked Questions
Can a seller in Colorado back out if the appraisal comes in low? The appraisal provisions in the Colorado contract give the right to terminate to the buyer. A seller can refuse to lower the price, and if no written agreement is reached by the Appraisal Resolution Deadline after a timely objection, the contract terminates.
Do I get my earnest money back if my Denver home appraises low? If you terminate on time under the appraisal provision, or the contract terminates at the Appraisal Resolution Deadline after a timely objection, the contract entitles you to the return of your earnest money. Missing the Appraisal Objection Deadline is what puts it at risk.
Can I challenge a low appraisal in Colorado? Yes. Ask your lender for a reconsideration of value and provide recent comparable sales. For Fannie Mae loans, you get one borrower-initiated request per appraisal with up to five additional comparables.
If you're buying or selling in Denver and want a plan for the appraisal before you sign, Jamie can help. Jamie Bridges is a REALTOR® with Keller Williams Realty DTC serving the Denver Metro Area and Summit County, Colorado. Call or text Jamie at 720-397-7555 to talk about your next move.
Sources: Colorado Contract to Buy and Sell Real Estate (Residential), mandatory use January 1, 2026, Sections 3, 4.3.2, 6, and 30; Colorado Division of Real Estate, "What is an Appraisal Gap on a Home Purchase?" (June 3, 2021); CFPB ECOA valuations fact sheet; interagency reconsideration of value guidance (July 18, 2024); Fannie Mae Selling Guide B4-1.3-12 and B2-1.2-01. Dollar figures are a hypothetical example. General information only. This isn't legal or lending advice.
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