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What is an Appraisal Gap and How it Can Impact a Home Purchase

What to Expect as Appraisal Gaps Grow

In today’s real estate market, low inventory and high demand are driving up home prices. As many as 54% of homes are getting offers over the listing price, based on the latest Realtors Confidence Index from the National Association of Realtors (NAR). Shawn Telford, Chief Appraiser at CoreLogicelaborates:

“The frequency of buyers being willing to pay more than the market data supports is increasing.”

While this is great news for today’s sellers, it can be tricky to navigate if the price of your contract doesn’t match up with the appraisal for the house. It’s called an appraisal gap, and it’s happening more in today’s market than the norm.

According to recent data from CoreLogic19% of homes had their appraised value come in below the contract price in April of this year. That’s more than double the percentage in each of the two previous Aprils.

The chart below uses the latest insights from NAR’s Realtors Confidence Index to showcase how often an issue with an appraisal slowed or stalled the momentum of a house sale in May of this year compared to May of last year.

If an appraisal comes in below the contract price, the buyer’s lender won’t loan them more than the house’s appraised value. That means there’s going to be a gap between the amount of loan the buyer can secure and the contract price on the house.

In this situation, both the buyer and seller have a vested interest in making sure the sale moves forward with little to no delay. The seller will want to make sure the deal closes, and the buyer won’t want to risk losing the home. That’s why it’s common for sellers to ask the buyer to make up the difference themselves in today’s competitive market. Well, that’s nice for the seller, but what can the buyer do if they end up in this situation where they have to come up with the difference? As the above chart shows, 13% of deals were terminated in May of 2021 because of this conflict.

As a Buyer What Can You Do if You’re Stuck in an Appraisal Gap?

You’re so close and your transaction is moving along and BAM, you get hit with an appraisal that’s coming up short.
If you and your agent have comps that show the home you want to buy is worth the price, based on similar homes, here’s what you can do.

  • Contact your lender and protest the results of the appraisal based on the comps you have.
  • Ask your lender for another appraisal from a different appraisal company.
  • If the second appraisal comes back too low, you may want to consider switching lenders. Your new lender will be in position to order a new appraisal.
  • If the appraisal still comes up short, discuss with your lender what your options are for coming up with the amount of money that makes up the difference. Perhaps you can decrease the amount of your down payment, withdraw money from 401K, or talk to the bank of mom and dad, or grandma and grandpa.

    You will need someone with not only the knowledge but also the skill of negotiating contracts in more complicated times.


Finding Homes for You has been in business working for buyers for 18+ years and is a member of the National Association of Exclusive Buyer Agents (see video below) We live in the trenches and fight for our buyers in every transaction. We look forward to sharing with you some of the solutions and options we’ve found in this crazy market. Let’s connect so you can have an ally throughout the process to help you navigate the unexpected, including appraisal gaps.