203k Loan Appraisal

[Matt Faix]

Anyone with 203k loan experience - We are working on our first 203k loan and have made it through a few of the steps (contractor bids, inspection, etc), but we have not yet had the appraisal completed. My understanding is that the appraisal is based on the contractor bid and the work to be completed (as well as the surrounding area and comps). 

In order for the loan to be approved the appraised value must be higher than the purchase price+renovation cost, but where I'm unclear is what happens if it doesn't appraise high enough? Are you able to renegotiate the sale price? and if not does the loan get denied. Are these the only outcomes or are there other ways the loan could still work. Thanks!