You’re under contract. Everyone’s excited. But then—boom—the appraisal comes in low. Now what?

An appraisal gap happens when the appraised value of a home is less than the agreed-upon purchase price. This can throw a serious wrench into the deal, especially if a loan is involved. But don’t panic—buyers and sellers both have options.

Here’s what to know and how to respond smartly.

🏡 What Causes an Appraisal Gap?

Appraisers use past sales data, market trends, and the property’s condition to determine value. But in a hot market, homes can sell above appraised value due to bidding wars or demand outpacing comps. That creates a gap.

💰 Why It Matters

Lenders will only finance up to the appraised value of a home. So if the appraisal is short, the buyer must come up with the difference—or the deal might fall apart.

Example:

• Purchase price: $500,000

• Appraised value: $470,000

• Gap: $30,000

• The lender will loan based on $470,000—not the purchase price.

🤝 Buyer Options

1. Pay the Difference

If you have the cash, you can cover the appraisal gap out-of-pocket.

This keeps the deal alive, but make sure you’re comfortable with the long-term value.

2. Negotiate a Lower Price

Ask the seller to reduce the sale price to match the appraisal—or meet you halfway.

A motivated seller may prefer a price drop over risking a lost deal.

3. Split the Gap

Buyers and sellers can share the gap with a price reduction and buyer contribution.

It’s a win-win compromise to keep things moving.

4. Challenge the Appraisal

Your agent can help dispute the appraisal if there were:

• Incorrect square footage

• Missed upgrades

• Inappropriate comps

This is rare, but sometimes it works.

5. Walk Away (If Contingent)

If you included an appraisal contingency, you can walk without penalty.

Always know your contract rights before making a decision.

🏠 Seller Options

1. Lower the Price

If keeping the deal matters more than top dollar, this may be the simplest path.

2. Ask the Buyer to Cover the Gap

If there were multiple offers or strong interest, you may ask the buyer to pay the difference.

3. Split the Difference

Agree to meet in the middle—especially if the buyer doesn’t want to walk, and you don’t want to relist.

4. Relist the Home

If no deal is reached and you believe the home is worth more, you could put it back on the market.

Be aware that future appraisals may come in similarly.

📌 Tips to Avoid Appraisal Gaps

• Price realistically based on comparable sold listings, not wishful thinking.

• Make sure your agent highlights upgrades and comps in advance to the appraiser.

• Use a local lender who understands neighborhood values and trends.

✨ Final Thoughts

Appraisal gaps are frustrating—but they’re fixable. Whether you’re a buyer or seller, the key is to stay calm, know your options, and work with an experienced agent who can guide you through the negotiation.

Need Help Navigating a Tricky Appraisal?

At Sold Realty Group, we’re here to help you make smart moves, not costly mistakes. We’ll walk you through every twist and turn—whether you're buying or selling.

📞 (480) 309-4322
📧 [email protected]
🌐 soldrealtygroupaz.com