What is an appraisal gap?

Appraisal gap is a hot term in today’s market.

If you’re looking for a home this spring it’ll help you to understand what an appraisal gap is and if you’re willing to use one.

If you’re planning to finance your home purchase with a mortgage, the property has to appraise at the agreed upon price.

If the appraisal comes in below the agreed upon sales price, the bank will still loan on the property, however, the loan amount will be based on the appraised value, not the purchase price determined by the parties.

We are seeing many multiple offer situations where the buyers are including an appraisal guarantee clause. Which means you, as the buyer, would make up the difference if the appraisal is lower than the accepted offer.

Offering to cover the appraisal gap could make your offer stand out amongst the crowd.