The appraisal came in under · Texas
What happens when the appraisal comes in low in Texas
Under the Texas contract, a low appraisal by itself doesn’t let you back out. Your lender’s decision about the loan does. Here is how that works, and which boxes on the appraisal addendum give up your right to walk away.
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Who decides
The appraisal is one of several things your lender weighs.
TREC No. 40-11 ¶ 2B does not mention a price gap, a percentage, or a shortfall. What gives you the right to terminate is your lender deciding the property does not satisfy its underwriting requirements — and the form is explicit that the appraisal is only one of the things that can cause it, alongside insurability and lender required repairs.
What happens next
The appraisal comes in under the contract price, and your lender reviews it.
If the lender approves it anyway
You can’t terminate under this paragraph.
A lender sizes the loan against the lower of the price or the appraised value, so most of the time a low number does move it. The question is whether you have enough cash for the loan to still work for the lender at the lower value. If you do, the property satisfied underwriting, there is no termination right here to use, and you are buying the house at the price you agreed.
If the lender says the property does not satisfy it
Then, and only then, you can terminate.
The right is real and it refunds your earnest money. You have to trigger it yourself: it takes a notice of termination and the lender's written statement of the reasons, and it has a date on it.
TREC No. 40-11 ¶ 2B
Ask your lender which of these applies to you before anyone starts negotiating. The answer shapes every conversation after it.
The appraisal addendum
Two of its three boxes give up your right to walk away.
TREC No. 49-1 is one page with three checkboxes and the instruction “Check one box only”. In a competitive offer, checking one of them is routinely presented as a way to make your offer stronger. It is — and here is what each one actually does.
| The box | What it does to your TREC No. 40-11 ¶ 2B right | What you fill in |
|---|---|---|
| Gives up a right (1) Waiver | You give up the right to terminate under ¶ 2B if property approval fails because of the appraised value. There is no figure and no limit — it applies however far under the price the appraisal lands. | What you fill in Nothing to fill in. |
| Gives up a right (2) Partial Waiver | You give up the same ¶ 2B right, but only where the opinion of value comes in at or above a dollar figure you name. Below that figure the right survives. It does not limit how much cash you might have to bring. | What you fill in One blank: a dollar amount. |
| Adds a right (3) Additional Right to Terminate | The only box that gives you something. On top of ¶ 2B, you may terminate if the appraised value lands under a figure you name — and you have to deliver a copy of the appraisal to the seller to do it. Terminate this way and the earnest money is refunded. Read the days carefully: they run from the Effective Date, not from the day the appraisal arrives. | What you fill in Two blanks: a number of days, and a dollar amount. |
Read box (3) carefully
The blank you fill in reads within ___ days after the Effective Date. That clock starts the day the contract was formed, not the day the appraisal lands. An appraisal is ordered after the contract and can take a couple of weeks to come back. Write a short number in that blank and the extra right you negotiated for can expire before the appraiser has filed anything. Then you have paid for protection you can’t use.
Two things to know about boxes (1) and (2)
The first: the dollar figure in box (2) is not a limit on your cash. It only sets the appraisal amount above which you give up the right to terminate. Texas REALTORS® says so directly — partial waiver “does not set an upper limit on the amount buyers will have to pay over the appraisal amount.” So box (2) does not limit how much cash you might have to bring to closing.
The second: boxes (1) and (2) each include a second sentence that’s easy to miss. If the lender reduces the loan because of the value it was given, the cash portion of the sales price increases by whatever the lender takes off the loan. It happens automatically: you cover the difference in cash at closing.
Another form to check
TREC No. 49-1 is not the only route to that waiver. TREC No. 40-11 ¶ 1G carries its own “does / does not waive all rights to terminate under ¶ 2B” checkbox. Narrower, but real — so check whether either form is attached, not just 49-1.
The deadline
Your right to walk away over the appraisal ends on a set date, even while you negotiate.
TREC No. 40-11 ¶ 2B ends by saying that if you do not terminate under it, property approval is deemed to have been obtained. So the exit stays open only until that day, even if you are still negotiating. It expires on its own once the day passes — the 3rd day before the closing date is the last day you can use it — and no notice goes out when it does.
So when an appraisal comes in low, watch the deadline first. Any negotiating happens while that window is running. Once it closes, the low appraisal no longer gives you a way out under the financing addendum.
Common questions
Questions about a low appraisal in Texas
Is the partial waiver a cap on how much cash I might have to bring?
No. The dollar figure in box (2) does not limit how much cash you might have to bring. Texas REALTORS® puts it plainly: choosing partial waiver “does not set an upper limit on the amount buyers will have to pay over the appraisal amount. It simply governs the appraisal amount upon which the buyer gives up the right to terminate.” If the appraisal is above that figure, you have given up the right to terminate and the cash portion of the sales price increases by whatever the lender takes off the loan. Below it, the ¶ 2B right survives.
My down payment is large. Does that change what happens?
It can, and it can work against you. The right to terminate in TREC No. 40-11 ¶ 2B depends on your lender deciding the property does not satisfy its underwriting requirements, not on the appraised number. If you are putting enough down that the lender is still comfortable with the loan at the lower value, the lender may approve the property anyway, and then there is nothing in that paragraph to terminate under. A bigger down payment makes your offer stronger, but it can also cost you the right to back out.
I am using an FHA or VA loan. Does any of this apply to me?
Not the addendum. The form says so itself. TREC No. 49-1 is to be used only where the Third Party Financing Addendum is attached and the loan is not FHA or VA, so the addendum is not yours. The rest of this page still is: TREC No. 40-11 ¶ 2B applies to you exactly as written, including the deadline that closes by itself, and TREC No. 40-11 ¶ 4 adds an appraised-value protection on top of it, disapplying the three-day notice requirement for that paragraph only. So ask your agent to walk you through TREC No. 40-11 ¶ 4 rather than assuming what you have read about 49-1 covers you.
If nobody sends me anything, is my appraisal protection still sitting there?
No. The last sentence of TREC No. 40-11 ¶ 2B covers this: if you do not terminate under it, property approval is deemed to have been obtained. There is no approval to wait for and nothing arrives to tell you the window shut. It closes by operation of the form once that day passes — the 3rd day before the closing date is the last day you can use it — whether anybody was watching or not.
Ask us about your own contract
Sources for the contract detail on this page, verified September 2026: TREC One to Four Family Residential Contract (Resale), No. 20-19 · TREC Third Party Financing Addendum, No. 40-11 · TREC Addendum Concerning Right to Terminate Due to Lender’s Appraisal, No. 49-1 · Texas Occupations Code Chapter 1101 · Texas Property Code § 5.008. Paragraph numbers move between form revisions, so each one above is cited with its form. TREC 40-7 and 40-9 are retired. The revisions read here are TREC No. 40-11, revised 11-04-2024, effective 01/03/2025, and TREC No. 49-1, revised 11-15-2018, effective 03/01/2019. Everything here describes how the forms work; what they mean for your contract is a question for an attorney.
After a low appraisal
A low appraisal starts a negotiation.
Sellers move, lenders reconsider, values get challenged, and buyers decide the house is worth the difference. What decides how that week goes is knowing which of your rights is real, which one somebody asked you to sign away, and exactly when your deadline passes.
Or call or text (817) 631-9803