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What Is an Appraisal Gap?
An appraisal gap can stop a transaction in its tracks if buyers and sellers aren't prepared for how to handle one. Here is a clear explanation of what an appraisal gap is and what options exist when it happens.
Video coming soon
The key takeaways are below in the meantime.
Written by Bri Bond-Erwin
Key Takeaways
- An appraisal gap occurs when the appraised value of a home comes in lower than the agreed-upon purchase price
- Lenders base the maximum loan amount on the appraised value, not the purchase price, so a gap creates a financing challenge
- When a gap occurs, buyers and sellers must resolve it for the transaction to continue
- Options include renegotiating the purchase price, the buyer covering the gap in cash, or requesting a reconsideration of value from the appraiser
- Some buyers include an appraisal gap clause in their offer, committing to cover a certain gap amount to strengthen their position in a competitive market
- Understanding appraisal gaps ahead of time helps buyers and sellers respond calmly and strategically when one happens
Transcript will be available when the video is recorded.
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