June 20, 2025|2025, Buyers, Buying, Tips, Trends, Market, Video
It’s the difference between the agreed-upon purchase price and the appraised value of the property.
• Why is it needed?
In a competitive market, buyers may need to offer above the asking price to secure a property, but lenders typically only finance up to the appraised value.
• How does it work?
The buyer includes an appraisal gap clause in the offer, stating how much they are willing to cover if the appraisal is lower than the purchase price.
• Example:
If a buyer offers $300,000 for a house, but the appraisal comes back at $280,000, they may have an appraisal gap of $20,000.
• Benefits for buyers:
Increased chances of getting the home, especially in competitive markets.
• Benefits for sellers:
Reduces the risk of a deal falling through due to a low appraisal.
• Risks for buyers:
Requires additional cash upfront to cover the gap, and potentially overpaying for the property if the appraisal is significantly lower than the purchase price.
• Negotiation:
If there is an appraisal gap, the buyer and seller can renegotiate the price, or the buyer can cover the gap with their own funds.
• Contingency:
An appraisal contingency allows the buyer to back out of the deal if the appraisal is lower than the purchase price, but this can make the offer less appealing to the seller. https://youtu.be/Pidcdpj-1_U
Contact Curtis Knight anytime with questions to do with real estate and he will answer them on his real estate website on the video page.
Curtis Knight
Curtis Knight Real Estate LLC
CKRE MA Business Lic # 423406
Office ID: AN5869
Real Estate Broker Licenses:
MA # 9564328
NH # 070879
FL # BK3621825
Cell/Text: 978-590-5910
Curtis@curtisknight.com