The design center prices your upgrades. The appraiser prices what buyers nearby have already paid for them.
What happens if a Richmond new build appraises low? When a Richmond new build appraises low, the lender bases the loan on the lower value, so the gap has to be covered another way: extra cash, a builder price reduction, removed upgrades if change orders are still open, or a reconsideration of value. Whether you can cancel and get the deposit back depends on your contract’s appraisal clause.
A low appraisal on new construction works differently from a resale appraisal. The builder’s own closings are often the comps, the incentives on those closings get adjusted, and the value is often set from a selections sheet before the house is framed. It’s a math problem with known moves. Here they are in the order we’d try them, with the rule behind each one.
The short version: 6 options, in the order we’d try them
| Option | When it works | What it costs the buyer | The rule behind it |
|---|---|---|---|
| Get the full appraisal and check it for errors | Always first | Time | Copy due promptly upon completion, or 3 business days before closing, whichever is earlier (12 CFR 1002.14) |
| Request a reconsideration of value (ROV) | Wrong facts, missing options, or a better sale the appraiser didn’t use | Time; 1 borrower request per appraisal on loans sold to Fannie Mae | Fannie Mae B4-1.3-12; HUD ML 2025-08; VA Lenders Handbook |
| Ask the builder to reduce the price | The builder agrees | Nothing | Loans use the lower of price or value (Fannie Mae B2-1.2-01); Form 670 ¶5(c) (2017 text) |
| Remove or swap upgrades | The change order window is open | Features you chose | Builder’s Change Order Policy; Form 670 ¶6(b) and ¶6(c) (2017 text) |
| Cover the gap with cash, or a larger loan if the lender allows it | The buyer has the funds and still wants the house | Extra cash, or a higher loan-to-value | Fannie Mae B2-1.2-01 and B3-4.1-02 |
| Cancel, if the appraisal clause allows it | There’s an appraisal contingency, or the loan is VA or FHA | The house, and possibly options deposits | Form 670 ¶5 (2017 text); 38 CFR 36.4303(k); HUD amendatory clause |
Want a second set of eyes on the comps before you file a reconsideration? Call 804-896-2694.
How a new build gets appraised
The appraisal often happens before the house exists
NVR Mortgage’s process page says that after loan approval, the next steps “include the start of construction, ordering the appraisal and opportunities for locking in your interest rate.” Under Fannie Mae’s rules, a new or proposed home is appraised from “plans and specifications, an existing model home, or other information,” subject to completion. Completion is later confirmed with a Form 1004D or a borrower and builder attestation letter. So the value is often set early, from the selections sheet.
Where the comps come from
In a new subdivision, Fannie Mae requires at least 1 closed sale from inside the community and at least 1 from outside it. An inside resale is “preferable if it is verifiable and does not involve the subject builder or developer,” but early on there may not be one. The appraiser “may need to rely solely on the builder” and can verify that sale “by viewing a copy of the settlement statement from the builder’s file.” If yours is one of the first homes to sell, 2 pending inside sales can stand in for 1 closed sale, plus at least 3 closed sales from outside.
Why incentives down the street can lower your number
Builder incentives are normal and legal. This is only how they show up in the math. Fannie Mae says comps with sales or financing concessions “must be adjusted to reflect the impact,” and positive adjustments for concessions “are not acceptable.” The adjustment should match how the market reacted, which isn’t automatically the full credit. Still, if the last 3 closings in a section came with large credits, the appraiser may adjust those prices down.
The cost approach helps but can’t carry the value
Fannie Mae doesn’t require the cost approach except for manufactured homes, but under USPAP the appraiser must include it when it’s “necessary for credible assignment results,” as it can be on new construction. “Appraisals that rely solely on the cost approach as an indicator of market value are not acceptable.” NAHB recommends that builders give appraisers an “appraisal binder” with a cost breakdown. That’s NAHB’s recommendation, not a lending rule.
Why upgrades and lot premiums don’t appraise dollar for dollar
Think about car options. The window sticker counts every package, but the trade-in desk counts only what used-car buyers pay extra for. Fannie Mae requires market-based adjustments with “fact-based and objective” comments on the data behind them, so an appraiser can’t just add up the option sheet.
- Lot premiums show up only as far as nearby sales show buyers paying more for that kind of lot: wooded, cul-de-sac, or walk-out. See our guide to choosing a lot on a Richmond new build.
- Structural items like square footage and finished space are measurable and comparable. Finish tiers often aren’t. Our post on which new construction upgrades are worth it covers resale value. Lennar Mortgage’s ROV page lists errors in “options, and upgrades” as valid grounds and notes “the appraiser’s measurements may differ from Lennar’s.”
- On Form 670 (2017 text), options become part of the price. “The price of Options selected by Purchaser shall be added to the Purchase Price,” and once selections are final, “the Purchase Price will be amended by an addendum.” The appraisal is measured against base price plus lot premium plus options.
What a low appraisal does to the loan and the cash to close
For a purchase, Fannie Mae uses “the lower of the sales price or the current appraised value.” This example is hypothetical.
| Hypothetical | At contract price | At appraised value |
|---|---|---|
| Price or value | $500,000 (includes $15,000 lot premium and $40,000 options) | $480,000 |
| Loan at 90 percent | $450,000 | $432,000 |
| Buyer’s cash toward the price | $50,000 | $68,000 |
| Builder concession cap at 6 percent | $30,000 | $28,800 |
The buyer needs an extra $18,000, less than the $20,000 gap, because 10 percent of it was already in the down payment. Keeping the $450,000 loan instead puts the loan-to-value at 93.75 percent, which Fannie rounds up to 94 percent. Above 90 percent, the cap on builder financing concessions for a principal residence drops to 3 percent, or $14,400 here, and mortgage insurance and pricing usually change too.
Builder credits can’t fund the down payment, and anything above the cap is treated as a sales concession and deducted from the price. A credit can cover closing costs, which frees the buyer’s own cash for the gap. Form 670 ¶4 (2017 text) adds that a seller contribution above what the lender allows “shall be retained by Seller.”
What your contract says about a low appraisal
The Virginia baseline: Form 670 ¶5
Most production builders use their own agreements, so treat Form 670 as the Virginia baseline, not as what your contract says. Virginia REALTORS® says the form is meant mainly for building in an existing community, and builders creating a new community need an attorney-drafted addendum to use it. In the 2017 text, its financing contingencies apply only “if noted below,” meaning checked. Under ¶5(c), for conventional or cash, the buyer won’t forfeit the Deposit or have to close “if the Purchase Price exceeds the value established by the appraiser” and the seller “does not agree to reduce the Purchase Price to the Appraised Value.” The buyer may still proceed, and if the builder agrees to the lower price, the contract stays in force.
What about options deposits?
In the 2017 text, ¶5(c) protects the “Deposit,” which ¶3 defines as the earnest money. It doesn’t mention options deposits. Other paragraphs of the same form expressly refund “Deposit and all Option deposit(s),” such as when the builder changes a selected option in a way that significantly affects the home (¶6(d)). We haven’t confirmed how the current form treats options deposits after an appraisal termination, so we won’t guess.
VA and FHA protections are federal, not optional
For VA, 38 CFR 36.4303(k) requires an escape clause when the price exceeds VA’s reasonable value and the veteran signed before receiving the Notice of Value. The veteran “shall not incur any penalty by forfeiture of earnest money” and may still proceed. For FHA, HUD’s model amendatory clause protects the buyer unless they’ve been given an appraised value “of not less than” the stated price. HUD adds: “Increases to the sale price require a revised amendatory clause.” That matters when change orders raise the price mid-build, so ask the lender how it handles it.
Builder contracts: what to look for
A local builder’s own appraisal explainer describes the walk-away right in terms of “an appraisal contingency in your offer on a resale home,” so read the new home paperwork itself. From the contract, a buyer should be able to answer:
- Is there an appraisal contingency at all, and is it tied to a loan type or lender?
- Who chooses between a price cut and termination, and by what deadline?
- What happens to options deposits?
- Is there a cap on what the builder will adjust?
Our Bon Air builder contract post covers other clauses.
How builder-affiliated lenders handle a low appraisal
Builder lenders follow the same appraiser independence rules as any lender. Regulation Z, 12 CFR 1026.42(c)(3), permits asking an appraiser “to consider additional, appropriate property information, including information about comparable properties” and to correct errors. Pushing for a number isn’t permitted. Lennar Mortgage publishes its ROV process: 1 ROV per appraisal, appraisers typically respond within 3 business days, and “Do not give your value opinion.” Main Street Homes says its preferred partners “use local seasoned appraisers who are familiar with our market and home values.”
Switching lenders is rarely the first move. The builder’s lender credit usually goes away (see builder preferred lender incentives), and the Virginia REALTORS® new home form limits lender changes in the 60 days before the estimated closing date, so check your own contract (Form 670 ¶5(h), 2017 text). The value may not change, either: on FHA loans the existing appraisal transfers to the new lender, and on conventional loans a new appraisal using the same comps may land in the same place.
How to challenge the value
Get the report
Under 12 CFR 1002.14, the lender must provide the appraisal “promptly upon completion, or 3 business days prior to consummation,” whichever is earlier. A buyer can waive that timing, but on a short appraisal it’s worth having the report early.
Conventional loans
Fannie Mae B4-1.3-12 allows 1 borrower-initiated ROV per appraisal. The request names the deficient areas and can include up to 5 comps with data sources and an explanation. The lender reviews it before sending it to the appraiser, and since September 2025 the ROV disclosure is required only when the appraisal report is delivered, not at application. Valid grounds include a value that “reflects prohibited discriminatory practices.” If the ROV ends with no change, Fannie’s FAQ says the borrower can’t demand a new appraisal, because accepting the appraiser’s conclusions is the lender’s decision.
FHA loans
HUD Mortgagee Letter 2025-08 (March 19, 2025) rescinded ML 2024-07, which had created a borrower-initiated FHA process, and restored the earlier rule: “The underwriter may request a reconsideration of value when the Appraiser did not consider information that was relevant on the effective date of the appraisal.” HUD’s current Handbook 4000.1 (Update 18) carries that same sentence. The buyer works through the lender.
VA loans
Before the appraisal is final, the Tidewater procedure applies: if value looks low, the appraiser notifies the requester and allows 2 business days for more sales data. VA “first piloted this procedure in the Tidewater area of Virginia.” After the Notice of Value, the veteran may request a reconsideration, VA staff review it within 5 business days, and if the market supports more, VA issues an amended Notice of Value. See our Richmond VA loan guide.
What makes an ROV work on a new build
Wrong square footage or bedroom count, options missing from the report, a better closed sale in the same section or a competing community, and comps that are a different product. “We think it’s worth more” doesn’t work, and no ROV is sure to change the value. We can pull recent comparable sales to support a buyer’s reconsideration of value request. On conventional and FHA loans, they go to the lender with the request, not straight to the appraiser, and Fannie Mae caps a borrower’s request at 5 comps. The appraiser decides whether the value changes, but on an FHA loan the lender’s underwriter decides whether to ask at all. On a VA loan, sales can go straight to the appraiser during the 2-business-day Tidewater window, and after the Notice of Value, VA staff make the call.
Negotiating with the builder: price, credits, and upgrades
A price reduction to the appraised value fixes the loan math. A credit doesn’t, and the cap on credits just went down. Cutting upgrades works only while the change order window is open, and Form 670 ¶6(b) (2017 text) allows a “non-refundable deposit” on selections, so check the Change Order Policy and cutoff dates. Builders don’t publish how they handle low appraisals, and we won’t guess.
A checklist for the week the appraisal lands
- Get the full report from the loan officer.
- Check square footage, room counts, options, and lot against the contract.
- Read the comps and how concessions were adjusted.
- Find the appraisal clause and its deadline.
- Send any ROV through the lender.
- Ask the builder, in writing, about a price reduction.
- Have the lender rerun the numbers at the appraised value.
Before you sign: lowering the odds
- Ask for recent closed prices in the same section, and whether they had incentives.
- Ask the lender when it orders the appraisal and whether it’s “subject to completion.”
- Budget a gap cushion before the design center.
- Weigh lot premium and options against closed sales, not the price sheet.
- Ask whether the builder gives appraisers a binder of options and costs.
Buying a resale instead? See our escalation clause and appraisal gap guide and our earnest money guide.
FAQ
Some do, but rarely dollar for dollar. An appraiser adjusts for features based on what buyers nearby have actually paid, not the design center price list. Added square footage and finished space usually count for more than finish tiers. If the report leaves out options you paid for, ask for a reconsideration of value.
Only as far as nearby sales support it. If closed sales show buyers paying more for wooded, cul-de-sac, or walk-out lots in that community or a competing one, the appraiser can adjust for it. A premium on the contract with no matching sales behind it often comes in short.
Yes. For a new subdivision, Fannie Mae generally requires at least 1 closed sale from inside the community, or 2 pending sales if yours is one of the first to sell, plus 1 from outside. The appraiser may verify an inside sale with the builder’s settlement statement and must account for big incentives in the adjustments.
The lender bases the loan on the lower of the price or the appraised value, so the buyer needs more cash, a lower price, fewer upgrades, or a revised value. A reconsideration of value is the first step if the report has errors or missed sales. The contract decides whether canceling is an option.
Yes, through the lender. On conventional loans sold to Fannie Mae, the borrower gets 1 reconsideration of value per appraisal, with up to 5 comparable sales and an explanation. FHA reconsiderations are requested by the lender’s underwriter. VA buyers can use the Tidewater procedure before the appraisal is final and request reconsideration after the Notice of Value.
Not directly. Builder credits can pay closing costs but can’t fund the down payment, and the cap on them is figured from the lower of the price or the appraised value. A price reduction to the appraised value is what fixes the loan math. A credit can still help by freeing up cash the buyer would have spent at closing.
Only if the contract gives you that right. On the 2017 text of the Virginia REALTORS® new construction form, a buyer with the conventional appraisal contingency checked doesn’t lose the deposit if the builder won’t reduce the price. Many builders use their own contracts, so read the appraisal clause and the options deposit terms before deciding.
Yes, when you sign before the value is known, which is typical on a new build. VA requires an escape clause, so a veteran can’t be forced to close above VA’s reasonable value. FHA requires an amendatory clause tied to an appraised value at least equal to the price. Either way, the buyer can still proceed.
Usually not as a first move. On an FHA loan the existing appraisal transfers to the new lender, so switching rarely gets a new value. On a conventional loan a new appraisal may use the same comps, and the builder’s lender credit usually goes away. Run the reconsideration of value first, then compare full loan estimates.
The short summary
- Comps: often the builder’s own closings, adjusted for their incentives.
- Contract: the appraisal clause decides whether canceling is an option and what happens to each deposit.
- Options in order: check the report, request a reconsideration, ask for a price cut, trim upgrades, then choose between cash and canceling.
If the appraisal on your new build came in short, or you’re about to sign the design center addendum, we’re happy to look at the report and the contract with you, pull recent comparable sales if a reconsideration of value makes sense, and lay out the options in order. Book a time at cal.com/danielyoon or call 804-896-2694.
General information, not legal or lending advice. Have a Virginia real estate attorney review your contract and ask your loan officer about your file.