What happens if the appraisal comes in low in Texas?
A low appraisal does not cancel your contract and it does not lower the sales price. In Texas, a buyer’s right to walk away over the appraised value lives in Paragraph 2B of the TREC Third Party Financing Addendum, which allows termination on or before the third day before the closing date, and only if the lender determines the property fails its underwriting requirements. By then your termination option period has usually expired, and whether you kept that protection was decided at signing, most often on TREC Form 49-1.
By Eric Duran, The Fort Real Estate | November 11, 2026
The call comes in the same shape. Inspection went fine, the option period closed, everybody relaxed — and then the appraisal lands twenty thousand dollars under the contract price. The first question is some version of “can I just get out?”
Usually yes — but not through the paragraph most buyers think, not on the timeline they expect, and not if a box was checked weeks ago that nobody explained. Three forms decide this.
Your option period is over, and it was never the appraisal paragraph anyway
The unrestricted right to terminate is Paragraph 5B of the One to Four Family Residential Contract (Resale) — TREC Form 20-19, printed 05-04-2026 and effective July 1, 2026, which replaced 20-18. It gives you a negotiated number of days after the effective date to terminate for any reason, by notice delivered by 5:00 p.m. local time where the property is located. The option fee is not refunded. The earnest money is.
Two things about it trip people up.
- It is unforgiving on timing. Paragraph 5E says time is of the essence and strict compliance is required. There is no grace period, and 5:00 p.m. means 5:00 p.m.
- It can be lost before it starts. Paragraph 5A requires the earnest money and option fee to reach the escrow agent within three days after the effective date, and 5D says that if no option fee amount is stated, or the fee is late, you do not have the unrestricted right to terminate at all.
Line that up against when appraisals happen. Most lenders order one after the buyer clears inspection, because nobody wants to pay for an appraisal on a deal about to die over a foundation. On a typical Fort Worth contract the report arrives well after the option period has closed, so the exit everyone remembers is gone by the time the number shows up.
The number surprises people here in particular, because Texas is a non-disclosure state: sale prices are not public record, so an appraiser working a Tanglewood or Arlington Heights assignment rebuilds the market from MLS data and adjustments. That is why the house down the street that sold for more may not be the comparable you think it is, and why the appraisal is one of four numbers attached to your house.
Paragraph 2B is the paragraph that matters
The appraisal protection sits in the Third Party Financing Addendum, TREC Form 40-11, printed 11-04-2024 and effective January 3, 2025. The July 2026 contract cycle did not touch it: the base contract moved to 20-19 and the Amendment to Contract to 39-11, both printed 05-04-2026, while 40-11 stayed where it was. If you hear that the appraisal rules changed in the 2026 forms, they did not.
Paragraph 2 of that addendum is headed Approval of Financing and has two halves. Buyer Approval (2A) is about you — credit, income, and assets — on its own deadline from the effective date. Property Approval (2B) is about the house, and that is where the appraisal lives.
If the lender determines the property does not satisfy its underwriting requirements — the form names appraisal, insurability, and lender-required repairs together — you may terminate on or before the third day before the closing date, by giving notice with a copy of the lender’s written statement. Earnest money is refunded. Otherwise Property Approval is deemed obtained and the contract rolls on. Three things follow:
- The trigger is the lender’s determination, not your disappointment. A number you dislike is not a lender declining to fund. You need the written statement.
- The deadline is tied to closing, not to the appraisal date. Depending on where the report lands in the schedule, that is three weeks of room or three days of it.
- Insurability sits in the same sentence. The same paragraph is your exit when a carrier will not write a policy on the house, which in older West Fort Worth stock happens more than buyers expect.
Paragraph 2 carries its own time-is-of-the-essence sentence as well. And if the loan is FHA or VA, call your loan officer: Paragraph 4 of the same addendum has its own appraised-value provision, and the three-day notice in 2B does not apply to it.
Form 49-1 decided this before the appraiser showed up
This is the part that catches people, and why two buyers in what look like identical situations get different answers.
TREC has a separate one-page form: the Addendum Concerning Right to Terminate Due to Lender’s Appraisal, Form 49-1, printed 11-15-18 and effective March 1, 2019, untouched through every contract revision since. It is used only when the Third Party Financing Addendum is attached and the loan is not FHA or VA, and it offers three boxes, one of which gets checked:
- Waiver. You give up the 2B termination right where Property Approval fails because the opinion of value does not satisfy the lender, and if the lender reduces the loan over that value, the cash portion of the sales price increases by the amount of the reduction. That is appraisal gap coverage written down: you agreed in advance to cover the shortfall in cash.
- Partial waiver. The same waiver, but only if the opinion of value comes in at a stated dollar figure or more. That figure is your ceiling on the gap.
- Additional right to terminate. The opposite direction: on top of 2B, you may terminate within a stated number of days after the effective date if the appraised value is less than a stated dollar figure, provided you deliver a copy of the appraisal to the seller. Earnest money is refunded.
So before asking what you can do about a low appraisal, pull your executed contract and look for a 49-1. No 49-1 and no waiver checked means Paragraph 2B is intact. If there is one, read which box is marked — on a competitive offer it may well be the waiver, and that was the trade you made to win the house.
Nothing adjusts on its own
A low appraisal changes one thing: how much the lender will lend against that house. The contract price does not move, the seller is under no obligation to come down, and no paragraph rewrites itself.
Any renegotiation gets documented on the Amendment to Contract, TREC Form 39-11, printed 05-04-2026, which carries check boxes for the cash portion of the sales price, the sum of financing, and the total sales price. In practice the conversation lands in one of four places: the seller comes down, you bring the difference in cash, you split it, or somebody walks.
One more piece, federal rather than Texas. Under Regulation B, 12 CFR 1002.14, a lender on a first-lien dwelling loan must give you a copy of the appraisal “promptly upon completion, or three business days prior to consummation of the transaction … whichever is earlier,” must notify you of that right within three business days of your application, and may not charge you for the copy. Read it yourself rather than take a summary over the phone. If you believe the appraiser got something wrong, there is a defined process for asking the lender to reconsider the value — and it is the lender’s request to make rather than yours.
I am a Realtor, not an attorney or an appraiser. Paragraph 23 of the contract tells you to consult an attorney before signing, and that lands hardest the day somebody asks you to waive an appraisal right. What I can tell you is what each box does to your position, and when the clock runs out.
Frequently Asked Questions
Can I back out if the appraisal comes in low in Texas?
Usually yes, through Paragraph 2B of the TREC Third Party Financing Addendum, which lets a buyer terminate on or before the third day before the closing date if the lender determines the property does not satisfy its underwriting requirements, with earnest money refunded. You need notice plus a copy of the lender’s written statement. If you signed TREC Form 49-1 with the waiver box checked, that right may be gone.
Does a low appraisal lower the purchase price?
No. The appraisal affects how much the lender will lend, not what you agreed to pay. Changing the price takes a signed Amendment to Contract, TREC Form 39-11, and the seller need not agree to one.
Doesn’t my option period cover the appraisal?
Almost never, as a matter of timing. The termination option in Paragraph 5B of TREC Form 20-19 runs a negotiated number of days from the effective date, and most lenders do not order the appraisal until inspection is cleared. By then that window has usually closed.
What is appraisal gap coverage in a Texas contract?
It is the waiver box on TREC Form 49-1. You give up the right to terminate under Paragraph 2B over the opinion of value, and if the lender reduces the loan over that value, the cash portion of the sales price rises by the amount of the reduction. The partial waiver box does the same only above a dollar figure you write in, which caps your exposure.
A low appraisal is not the end of a deal, and not an automatic exit either. It is a question about which paragraph you still have and how many days are left on it — both set long before the report arrived. If you are staring at a number that does not work, send me a text or call 817-703-1333 and we will go through your contract paragraph by paragraph.
About Eric Duran
Eric Duran is the founder and Realtor behind The Fort Real Estate, a boutique brokerage in Fort Worth, Texas. A former firefighter and paramedic, he’s guided buyers and sellers across West Fort Worth since 2020 — from TCU, Colonial, and Tanglewood to Ridglea, Arlington Heights, and the new builds out in Aledo. He has been recognized as a Fort Worth Real Producers Top Agent in 2025 and 2026, a list ranked by MLS sales volume and limited to the top 1,000 agents in the market, and was featured in the magazine as an “Agent on the Rise” in May 2025. Reach Eric at 817-703-1333 or thefortre.com.