Definition
The difference between your purchase price and the appraised value when the appraisal is lower than your agreed price. Appraisal gaps create financing and equity issues and require additional cash at closing.
Where you’ll meet it
How do I make an offer without overpaying?
See it in Buying my first home · Step 4About this term
An appraisal gap occurs when a home appraises for less than the agreed purchase price, creating financial risk for the buyer. The buyer must cover the difference in cash or renegotiate the price. Appraisal gaps are common in competitive markets when bidding wars push prices above market value.
Pro Tip
In competitive markets, be cautious about offering significantly above comparable sales.
Example
You agreed to pay $450,000, but the appraisal comes in at $440,000, creating a $10,000 appraisal gap you must cover in cash.