{"id":55473,"date":"2026-09-24T12:45:37","date_gmt":"2026-09-24T19:45:37","guid":{"rendered":"https:\/\/www.movoto.com\/blog\/?p=55473"},"modified":"2026-09-24T12:45:37","modified_gmt":"2026-09-24T19:45:37","slug":"appraisal-gap","status":"publish","type":"post","link":"https:\/\/www.movoto.com\/blog\/appraisal-gap\/","title":{"rendered":"What Is an Appraisal Gap? What Homebuyers Need to Know"},"content":{"rendered":"<p>An appraisal gap happens when a home&#8217;s appraised value is lower than the purchase price in the contract.<\/p>\n<p>For example, if you agree to pay $400,000 for a home and the appraisal comes in at $380,000, there is a $20,000 appraisal gap.<\/p>\n<p>That doesn&#8217;t automatically end the purchase. But it can affect how much the lender is willing to finance and may require the buyer and seller to renegotiate, change the financing or find another way to address the difference.<\/p>\n<h2 class=\"h\">Key Takeaways<\/h2>\n<ol>\n<li>An appraisal gap is the difference between a home&#8217;s purchase price and a lower appraised value.<\/li>\n<li>A low appraisal can reduce the amount a lender will finance under the original loan structure.<\/li>\n<li>Buyers may negotiate, bring additional cash or use contract protections if the appraisal comes in low.<\/li>\n<\/ol>\n<h2>What Is an Appraisal Gap?<\/h2>\n<p>An appraisal gap is the amount by which the agreed purchase price exceeds the home&#8217;s appraised value.<\/p>\n<p>The basic calculation is:<\/p>\n<p><strong>Purchase price \u2212 appraised value = appraisal gap<\/strong><\/p>\n<p>For example:<\/p>\n<table>\n<thead>\n<tr>\n<th>Purchase price<\/th>\n<th>Appraised value<\/th>\n<th>Appraisal gap<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>$400,000<\/td>\n<td>$400,000<\/td>\n<td>$0<\/td>\n<\/tr>\n<tr>\n<td>$400,000<\/td>\n<td>$390,000<\/td>\n<td>$10,000<\/td>\n<\/tr>\n<tr>\n<td>$400,000<\/td>\n<td>$380,000<\/td>\n<td>$20,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The appraisal is an independent opinion of the property&#8217;s value. It doesn&#8217;t automatically change the purchase price written into the contract.<\/p>\n<p>Instead, a low appraisal creates a difference that the transaction may need to resolve before closing.<\/p>\n<h2>Why Does an Appraisal Gap Matter?<\/h2>\n<p>When you&#8217;re financing a home, the lender considers the value of the property securing the mortgage.<\/p>\n<p>For many conventional purchase mortgages, loan-to-value ratio is calculated using the lower of the purchase price or appraised value.<\/p>\n<p>That means a $400,000 contract does not automatically allow the lender to treat the property as $400,000 of collateral if it appraises for $380,000.<\/p>\n<p>A lower value can affect:<\/p>\n<ul>\n<li>Maximum loan amount<\/li>\n<li>Loan-to-value ratio<\/li>\n<li>Down payment<\/li>\n<li>Mortgage insurance<\/li>\n<li>Cash needed at closing<\/li>\n<li>Whether the original loan structure still works<\/li>\n<\/ul>\n<p>The Consumer Financial Protection Bureau also cautions that buying for more than the appraised value can create financial risk and recommends reviewing the appraisal carefully when the value comes in below the sales price.<\/p>\n<h2>Does the Buyer Have to Pay the Entire Appraisal Gap?<\/h2>\n<p>Not necessarily.<\/p>\n<p>You may hear that if a home appraises $20,000 low, the buyer automatically needs another $20,000 in cash.<\/p>\n<p>The actual financing impact can be more complicated.<\/p>\n<p>Suppose you agree to purchase a home for $400,000 with 10% down.<\/p>\n<p>You originally expect:<\/p>\n<ul>\n<li>Purchase price: $400,000<\/li>\n<li>Down payment: $40,000<\/li>\n<li>Loan amount: $360,000<\/li>\n<\/ul>\n<p>Now assume the appraisal comes in at $380,000.<\/p>\n<p>If the mortgage is structured around a maximum 90% loan-to-value ratio based on the appraised value, 90% of $380,000 is $342,000.<\/p>\n<p>If the $400,000 price does not change, the buyer would need $58,000 toward the price instead of the originally expected $40,000.<\/p>\n<p>In that example, the additional cash requirement is $18,000 rather than the full $20,000 appraisal gap.<\/p>\n<p>The exact result depends on the loan program, loan-to-value limits, mortgage insurance and lender requirements.<\/p>\n<p>A <a href=\"https:\/\/www.lower.com\/mortgages\/calculators\/cash-to-close\">cash-to-close calculator<\/a> can help you model how a different loan amount or down payment affects the money needed at closing.<\/p>\n<h2>Why Do Appraisal Gaps Happen?<\/h2>\n<p>A low appraisal does not necessarily mean someone made a mistake.<\/p>\n<p>Several factors can create a difference between the contract price and appraised value.<\/p>\n<h3>Competitive Bidding Pushes the Price Higher<\/h3>\n<p>Multiple buyers may compete for a property and push the winning offer above recent comparable sales.<\/p>\n<p>An <a href=\"\/blog\/what-is-an-escalation-clause\/\">escalation clause<\/a>, for example, can increase a buyer&#8217;s price in response to competing offers.<\/p>\n<p>The fact that buyers were willing to bid higher does not guarantee the appraisal will reach the same number.<\/p>\n<h3>The Market Is Moving Quickly<\/h3>\n<p>Appraisers generally rely heavily on recent closed sales.<\/p>\n<p>In a rapidly appreciating market, current offers may move faster than the closed transactions available as comparable sales.<\/p>\n<h3>The Home Is Unusual<\/h3>\n<p>A unique home can be harder to compare with recent sales.<\/p>\n<p>Differences in acreage, architecture, renovations, views, location or other characteristics can make the valuation more complex.<\/p>\n<h3>The Offer Is Simply Above the Supported Value<\/h3>\n<p>A buyer may intentionally offer more than recent market evidence supports because they value the property highly or believe strong competition requires it.<\/p>\n<p>That is a negotiation decision, but the appraiser still develops an independent opinion of value.<\/p>\n<h2>What Is an Appraisal Gap Clause?<\/h2>\n<p>An appraisal gap clause is contract language addressing what the buyer agrees to do if the appraisal comes in below the purchase price.<\/p>\n<p>One common approach is to state a maximum dollar amount the buyer is willing to cover.<\/p>\n<p>For example:<\/p>\n<ul>\n<li>Purchase price: $400,000<\/li>\n<li>Appraisal gap coverage: up to $15,000<\/li>\n<\/ul>\n<p>If the property appraises at $390,000, the $10,000 difference falls within the buyer&#8217;s stated $15,000 limit.<\/p>\n<p>If the property appraises at $375,000, the $25,000 gap exceeds the agreed $15,000 coverage amount.<\/p>\n<p>What happens to the remaining difference depends on the exact contract language.<\/p>\n<p>The parties could potentially negotiate further, or an applicable appraisal contingency may establish additional rights.<\/p>\n<h2>Appraisal Gap vs. Appraisal Contingency<\/h2>\n<p>These terms describe different things.<\/p>\n<table>\n<thead>\n<tr>\n<th>Term<\/th>\n<th>What it means<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Appraisal gap<\/td>\n<td>The difference between the contract price and a lower appraised value<\/td>\n<\/tr>\n<tr>\n<td>Appraisal contingency<\/td>\n<td>A contract provision giving the buyer specified rights if the appraisal doesn&#8217;t support the purchase price<\/td>\n<\/tr>\n<tr>\n<td>Appraisal gap coverage<\/td>\n<td>A buyer&#8217;s agreement to cover some or all of an appraisal shortfall<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>An appraisal contingency can give a buyer options if the property appraises below the agreed price.<\/p>\n<p>Depending on the contract, those options might include:<\/p>\n<ul>\n<li>Renegotiating the price<\/li>\n<li>Proceeding with the purchase<\/li>\n<li>Providing additional cash<\/li>\n<li>Terminating the contract within the contingency terms<\/li>\n<\/ul>\n<p>An appraisal-gap provision can modify those protections by committing the buyer to cover a specified amount first.<\/p>\n<p>Contract language varies, so don&#8217;t assume every appraisal contingency or gap clause works the same way.<\/p>\n<h2>Example of Appraisal Gap Coverage<\/h2>\n<p>Suppose you offer $450,000 and agree to cover an appraisal gap of up to $20,000.<\/p>\n<table>\n<thead>\n<tr>\n<th>Appraised value<\/th>\n<th>Gap<\/th>\n<th>How the clause could apply<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>$450,000<\/td>\n<td>$0<\/td>\n<td>No appraisal gap<\/td>\n<\/tr>\n<tr>\n<td>$445,000<\/td>\n<td>$5,000<\/td>\n<td>Within the $20,000 coverage limit<\/td>\n<\/tr>\n<tr>\n<td>$430,000<\/td>\n<td>$20,000<\/td>\n<td>At the coverage limit<\/td>\n<\/tr>\n<tr>\n<td>$420,000<\/td>\n<td>$30,000<\/td>\n<td>Exceeds the $20,000 coverage limit; next steps depend on the contract<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>This example addresses the contractual gap amount.<\/p>\n<p>Your lender must separately determine how the appraisal changes the actual mortgage and cash required.<\/p>\n<h2>Appraisal Gap Coverage vs. Waiving the Appraisal Contingency<\/h2>\n<p>Offering limited appraisal-gap coverage is not necessarily the same as completely waiving appraisal protection.<\/p>\n<p>A buyer might agree to cover the first $10,000 or $20,000 of a shortfall while retaining contractual options if the gap exceeds that amount.<\/p>\n<p>By contrast, broadly waiving the appraisal contingency can leave the buyer with much more exposure if the appraisal is substantially lower than expected.<\/p>\n<p>Before changing or waiving an appraisal provision, understand:<\/p>\n<ul>\n<li>How much additional cash you could need<\/li>\n<li>What happens if the appraisal is substantially low<\/li>\n<li>Whether financing remains available<\/li>\n<li>What happens to your earnest money if you cannot close<\/li>\n<li>Which other contractual protections remain<\/li>\n<\/ul>\n<p>A stronger offer is not automatically a better financial decision if the buyer cannot comfortably satisfy the terms.<\/p>\n<h2>What Happens if the Appraisal Comes in Low?<\/h2>\n<p>A low appraisal can lead to several potential outcomes.<\/p>\n<h3>1. The Seller Lowers the Price<\/h3>\n<p>The seller may agree to reduce the purchase price to the appraised value.<\/p>\n<p>For example, a $400,000 contract could be amended to $385,000 after a $385,000 appraisal.<\/p>\n<p>This can resolve the valuation problem cleanly, but the seller isn&#8217;t automatically required to agree.<\/p>\n<h3>2. The Buyer Brings More Cash<\/h3>\n<p>The buyer may decide to proceed at the original price and increase their cash contribution.<\/p>\n<p>Before doing that, ask the lender exactly how much additional cash is actually needed under the revised loan-to-value calculation.<\/p>\n<p>Also consider how much money you will have left after closing for emergencies, repairs and other homeownership costs.<\/p>\n<h3>3. Buyer and Seller Split the Difference<\/h3>\n<p>The parties can renegotiate toward a middle ground.<\/p>\n<p>If a $400,000 home appraises for $380,000, for example, the seller could reduce the price while the buyer agrees to provide some additional cash.<\/p>\n<p>The final structure depends on what both sides agree to and what the lender permits.<\/p>\n<h3>4. The Buyer Requests a Reconsideration of Value<\/h3>\n<p>If there appears to be a factual error or important market information was missed, the borrower can ask the lender about a reconsideration of value, or ROV.<\/p>\n<p>Potential issues might include:<\/p>\n<ul>\n<li>Incorrect square footage<\/li>\n<li>Incorrect bedroom or bathroom count<\/li>\n<li>Missing property features<\/li>\n<li>Incorrect condition information<\/li>\n<li>More relevant comparable sales that were not considered<\/li>\n<\/ul>\n<p>A reconsideration request should be based on specific evidence.<\/p>\n<p>Simply believing the home is worth more does not require the appraiser to change the opinion of value.<\/p>\n<h3>5. The Loan Structure Changes<\/h3>\n<p>Depending on the transaction, the lender may be able to restructure the mortgage.<\/p>\n<p>That might involve a different loan amount, down payment or mortgage-insurance structure.<\/p>\n<p>The options depend on the buyer&#8217;s finances and loan program.<\/p>\n<h3>6. The Transaction Ends<\/h3>\n<p>If the buyer and seller cannot resolve the gap, the purchase may not close.<\/p>\n<p>Whether the buyer can terminate without losing earnest money depends on the contract and any applicable appraisal or financing contingencies.<\/p>\n<h2>Can You Challenge a Low Appraisal?<\/h2>\n<p>You can ask the lender to review concerns about the appraisal.<\/p>\n<p>The process is generally called a reconsideration of value.<\/p>\n<p>Start by reviewing the report carefully.<\/p>\n<p>Look for factual errors and evaluate the comparable sales the appraiser used.<\/p>\n<p>Your real estate agent may also be able to identify relevant recent sales or factual property information to provide to the lender.<\/p>\n<p>The request generally goes through the lender rather than directly from the borrower to the appraiser.<\/p>\n<p>There is no guarantee that a reconsideration will raise the value.<\/p>\n<p>Current consumer guidance from the National Association of REALTORS\u00ae notes that buyers can request an ROV when they believe important property information or comparable sales were not appropriately considered.<\/p>\n<h2>Do You Get a Copy of the Appraisal?<\/h2>\n<p>For many first-lien residential mortgage applications, federal rules require the lender to provide the applicant with a copy of appraisals and other written valuations.<\/p>\n<p>The Consumer Financial Protection Bureau says borrowers should generally receive the appraisal promptly after it is completed and no later than three business days before closing.<\/p>\n<p>Review the report instead of looking only at the final value.<\/p>\n<p>It can contain information about:<\/p>\n<ul>\n<li>Property characteristics<\/li>\n<li>Condition<\/li>\n<li>Comparable sales<\/li>\n<li>Adjustments made to those comparables<\/li>\n<li>Market conditions<\/li>\n<li>Final opinion of value<\/li>\n<\/ul>\n<p>Our guide to <a href=\"\/blog\/what-is-a-home-appraisal\/\">what a home appraisal is<\/a> explains the valuation process in more detail.<\/p>\n<h2>Can Seller Concessions Cover an Appraisal Gap?<\/h2>\n<p>Not in the same way they cover eligible closing costs.<\/p>\n<p>A <a href=\"\/blog\/what-is-a-seller-concession\/\">seller concession<\/a> generally applies seller funds toward eligible buyer expenses such as closing costs, prepaid expenses or certain rate-buydown costs.<\/p>\n<p>It does not simply increase the property&#8217;s appraised value.<\/p>\n<p>A seller could instead agree to lower the purchase price, which directly reduces the gap.<\/p>\n<p>There are situations where adjusting seller credits and purchase price together changes the overall economics of the transaction, but the lender must approve the final structure.<\/p>\n<h2>Can an Appraisal Gap Affect Mortgage Insurance?<\/h2>\n<p>Potentially.<\/p>\n<p>Because the appraisal can affect the loan-to-value ratio, a low value can also affect whether mortgage insurance is required or how the loan is structured.<\/p>\n<p>For conventional loans, private mortgage insurance commonly applies when the loan-to-value ratio exceeds 80%.<\/p>\n<p>If the property&#8217;s appraised value comes in lower than expected while the loan amount stays high, the resulting LTV can increase.<\/p>\n<p>Your lender can explain whether the low appraisal changes mortgage insurance or pricing for the specific loan.<\/p>\n<h2>How Does an Appraisal Gap Affect Cash to Close?<\/h2>\n<p>A low appraisal can increase cash to close because the lender may finance less of the purchase price under the original loan structure.<\/p>\n<p>But remember: the increase in cash is not necessarily identical to the appraisal-gap amount.<\/p>\n<p>Before deciding whether to cover a gap, request updated numbers from the lender showing:<\/p>\n<ul>\n<li>Revised loan amount<\/li>\n<li>Down payment<\/li>\n<li>Mortgage insurance<\/li>\n<li>Closing costs<\/li>\n<li>Seller credits<\/li>\n<li>Total estimated cash to close<\/li>\n<\/ul>\n<p>Mortgage-specific <a href=\"https:\/\/www.lower.com\/mortgages\/what-is-an-appraisal-gap\">appraisal gap examples<\/a> can help illustrate how a lower value changes financing under different scenarios.<\/p>\n<h2>Should You Offer Appraisal Gap Coverage?<\/h2>\n<p>There isn&#8217;t one correct answer.<\/p>\n<p>Appraisal-gap coverage can make an offer more attractive to a seller because it reduces uncertainty about what happens if the appraisal is low.<\/p>\n<p>But it transfers some of that risk to the buyer.<\/p>\n<p>Before offering coverage, consider:<\/p>\n<ul>\n<li>How much cash you have available<\/li>\n<li>How much you need for closing costs<\/li>\n<li>How much emergency savings you want to preserve<\/li>\n<li>Whether you expect immediate repairs or improvements<\/li>\n<li>How far the offer is above recent comparable sales<\/li>\n<li>How a low appraisal would affect your mortgage<\/li>\n<li>The maximum amount you&#8217;re genuinely comfortable paying<\/li>\n<\/ul>\n<p>Don&#8217;t choose a gap amount simply because you think it will win the home.<\/p>\n<p>Choose an amount you could actually fund if the clause is triggered.<\/p>\n<h2>How Much Appraisal Gap Coverage Should You Offer?<\/h2>\n<p>There is no standard percentage or dollar amount.<\/p>\n<p>A buyer could offer:<\/p>\n<ul>\n<li>No appraisal-gap coverage<\/li>\n<li>A fixed amount such as $5,000<\/li>\n<li>A larger fixed cap such as $20,000<\/li>\n<li>Full gap coverage<\/li>\n<li>Another structure permitted by the contract<\/li>\n<\/ul>\n<p>A fixed cap can make the maximum exposure easier to understand.<\/p>\n<p>Full gap coverage creates substantially more uncertainty because the final cash obligation depends on an appraisal that has not happened yet.<\/p>\n<p>Before offering any coverage, ask your lender to model what different appraisal values would do to your mortgage.<\/p>\n<h2>Appraisal Gap and Escalation Clauses<\/h2>\n<p>Escalation clauses and appraisal-gap provisions can interact.<\/p>\n<p>An escalation clause may automatically increase the purchase price when competing offers meet specified conditions.<\/p>\n<p>But the appraisal doesn&#8217;t automatically increase because the offer did.<\/p>\n<p>Suppose:<\/p>\n<ul>\n<li>Original offer: $400,000<\/li>\n<li>Escalated price: $425,000<\/li>\n<li>Appraised value: $405,000<\/li>\n<\/ul>\n<p>The buyer now has a $20,000 appraisal gap.<\/p>\n<p>If the offer also included appraisal-gap coverage, the contract determines how much of that difference the buyer has agreed to cover.<\/p>\n<p>That is why buyers using an escalation clause should consider appraisal risk before setting their maximum price.<\/p>\n<h2>Can an Appraisal Gap Happen With FHA or VA Financing?<\/h2>\n<p>Yes.<\/p>\n<p>An appraisal gap is not exclusive to conventional mortgages.<\/p>\n<p>A purchase price can exceed the value established through an FHA or VA appraisal as well.<\/p>\n<p>How the shortfall affects financing depends on the applicable program rules, loan amount and contract.<\/p>\n<p>FHA and VA appraisals can also involve property-condition requirements beyond valuation, so a transaction may have both a value issue and a condition issue to resolve.<\/p>\n<p>Ask the lender how a low appraisal affects the specific mortgage rather than assuming every program handles the gap identically.<\/p>\n<h2>Can You Avoid an Appraisal Gap?<\/h2>\n<p>You cannot control the final appraisal value, but you can reduce the risk of being financially unprepared.<\/p>\n<h3>Review Comparable Sales Before Making the Offer<\/h3>\n<p>Ask your real estate agent how the offer price compares with recent nearby sales.<\/p>\n<p>If you&#8217;re offering substantially more than the available comps support, understand that appraisal risk may be higher.<\/p>\n<h3>Set a Maximum Price<\/h3>\n<p>Decide what the property is worth to you before a competitive negotiation pushes the number higher.<\/p>\n<h3>Set a Separate Appraisal-Gap Limit<\/h3>\n<p>Your maximum offer price and maximum appraisal-gap exposure do not have to be the same number.<\/p>\n<h3>Keep Cash Available<\/h3>\n<p>A buyer agreeing to appraisal-gap coverage should not commit every available dollar to the planned down payment.<\/p>\n<p>Preserve enough liquidity for closing costs, the potential gap and expenses after moving in.<\/p>\n<h3>Talk to the Lender Before You Submit the Offer<\/h3>\n<p>Ask what would happen if the property appraised $10,000, $20,000 or more below your offer.<\/p>\n<p>This can help you understand the actual additional cash requirement instead of assuming it will equal the full gap.<\/p>\n<p>An affordability estimate can also help you test different purchase prices before you <a href=\"\/blog\/how-to-make-an-offer-on-a-house\/\">make an offer on a house<\/a>.<\/p>\n<h2>Is Paying an Appraisal Gap the Same as Overpaying?<\/h2>\n<p>Not necessarily, but the distinction matters.<\/p>\n<p>An appraisal is a professional opinion of value based on market evidence as of a particular date.<\/p>\n<p>A buyer may decide a property is personally worth more because of its location, features, scarcity or other priorities.<\/p>\n<p>But paying more than the appraisal means you are agreeing to a price above the value supported by that appraisal.<\/p>\n<p>That can affect your initial equity position and the amount of cash required.<\/p>\n<p>Before covering a large gap, consider whether you would still be comfortable with the purchase if home values stayed flat or declined after closing.<\/p>\n<h2>Appraisal Gap vs. Down Payment<\/h2>\n<p>Your down payment and appraisal-gap coverage are related but different.<\/p>\n<p>The down payment is the portion of the purchase price not financed by the mortgage under the loan structure.<\/p>\n<p>An appraisal gap occurs because the lender&#8217;s accepted value is lower than the agreed purchase price.<\/p>\n<p>A low appraisal can therefore increase the cash contribution needed beyond what you originally expected for the down payment.<\/p>\n<p>This is another reason to ask the lender for revised cash-to-close figures rather than simply adding the dollar gap to your original down payment.<\/p>\n<h2>What Should Sellers Know About an Appraisal Gap?<\/h2>\n<p>A low appraisal creates a decision for sellers too.<\/p>\n<p>If the buyer cannot or will not cover the shortfall, the seller may have to decide whether to:<\/p>\n<ul>\n<li>Reduce the price<\/li>\n<li>Negotiate a compromise<\/li>\n<li>Support an appraisal-review request with relevant property information<\/li>\n<li>Allow the existing transaction to end according to the contract<\/li>\n<li>Return to the market<\/li>\n<\/ul>\n<p>A seller is not automatically required to reduce the price simply because the appraisal comes in low.<\/p>\n<p>But if a future buyer also uses mortgage financing, another appraisal may create a similar issue if the price remains above available market support.<\/p>\n<h2>Bottom Line<\/h2>\n<p>An appraisal gap is the difference between the price you&#8217;ve agreed to pay for a home and a lower appraised value.<\/p>\n<p>It matters because the lender may use the lower value when calculating how much it can finance, potentially increasing the buyer&#8217;s cash requirement.<\/p>\n<p>A low appraisal does not automatically kill the transaction. The seller may lower the price, the buyer may bring additional cash, the parties may compromise, the borrower may request a review or the contract may provide a way to terminate.<\/p>\n<p>If you&#8217;re considering appraisal-gap coverage before making an offer, set a real financial limit. Know how much additional cash you can comfortably provide, how the clause interacts with your appraisal contingency and what a low appraisal would actually do to your mortgage.<\/p>\n<h2>FAQ<\/h2>\n<h3>What is an appraisal gap?<\/h3>\n<p>An appraisal gap is the difference between a home&#8217;s agreed purchase price and a lower appraised value. A $400,000 contract with a $380,000 appraisal creates a $20,000 appraisal gap.<\/p>\n<h3>Who pays an appraisal gap?<\/h3>\n<p>No one automatically has to pay the entire gap. The buyer may provide additional cash, the seller may reduce the price, the parties may compromise or the transaction may end depending on the contract.<\/p>\n<h3>Does the buyer have to bring the full appraisal gap in cash?<\/h3>\n<p>Not necessarily. The additional cash requirement depends on the mortgage&#8217;s loan-to-value calculation, down payment and loan structure. Ask the lender for updated cash-to-close figures after a low appraisal.<\/p>\n<h3>What is an appraisal gap clause?<\/h3>\n<p>An appraisal gap clause is contract language describing how much of a low-appraisal shortfall the buyer agrees to cover. It may include a specific dollar cap.<\/p>\n<h3>What is the difference between an appraisal gap and an appraisal contingency?<\/h3>\n<p>The appraisal gap is the dollar difference between the purchase price and lower appraised value. An appraisal contingency is a contractual protection that may give the buyer certain options when the appraisal is low.<\/p>\n<h3>Can you negotiate after a low appraisal?<\/h3>\n<p>Potentially. Buyers and sellers may renegotiate the purchase price or other terms, depending on the contract and willingness of both parties.<\/p>\n<h3>Can you challenge a low appraisal?<\/h3>\n<p>You can ask the lender about a reconsideration of value if you believe the appraisal contains factual errors or missed relevant information or comparable sales. A reconsideration does not guarantee the value will change.<\/p>\n<h3>Can seller concessions cover an appraisal gap?<\/h3>\n<p>Seller concessions generally cover eligible buyer transaction costs rather than increasing the home&#8217;s appraised value. A seller could instead agree to reduce the purchase price, which directly reduces the gap.<\/p>\n<h3>Can an FHA or VA loan have an appraisal gap?<\/h3>\n<p>Yes. A property&#8217;s purchase price can exceed the appraised value under FHA or VA financing as well. The mortgage-specific impact depends on the applicable program and lender requirements.<\/p>\n<h3>Should you waive the appraisal contingency?<\/h3>\n<p>Waiving appraisal protection can increase the buyer&#8217;s financial exposure if the value comes in low. Before doing so, understand how much cash you could be required to provide and what contractual options you would be giving up.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>An appraisal gap happens when a home&#8217;s appraised value is lower than the purchase price in the contract. For example, if you agree to pay $400,000 for a home and the appraisal comes in at $380,000, there is a $20,000 appraisal gap. That doesn&#8217;t automatically end the purchase. But it can affect how much the lender is willing to finance and may require the buyer and seller to renegotiate, change the financing or find another way to address the difference. Key Takeaways An appraisal gap is the difference between a home&#8217;s purchase price and a lower appraised value. A low [&hellip;]<\/p>\n","protected":false},"author":31,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[260],"tags":[519,520,357,447,111],"class_list":["post-55473","post","type-post","status-publish","format-standard","hentry","category-buyer","tag-appraisal-gap","tag-home-appraisal","tag-home-buying","tag-making-an-offer","tag-mortgage","post--single"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What Is an Appraisal Gap? 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