What Is Appraisal Gap?
An appraisal gap occurs when a property appraises for less than the agreed purchase price, leaving the buyer to cover the difference in cash, renegotiate, or walk away if an appraisal contingency allows it.
Example
A home under contract for $420,000 that appraises at $400,000 has a $20,000 appraisal gap — the lender will only base financing on the $400,000 appraised value.
Why It Matters
In competitive markets, buyers sometimes waive the appraisal contingency or agree in advance to cover a gap up to a set amount to make their offer more competitive — understanding this risk before offering matters.