JARGON MADE SIMPLE SERIES - Appraisal Gap

Jargon

Real estate can feel overwhelming with all the acronyms and industry terms. Our Jargon Made Simple series breaks down complex concepts into clear, everyday language, so whether you’re buying or selling in Bend and Central Oregon, you can make confident decisions without the confusion.

What is an Appraisal Gap?

Buying a home comes with plenty of new terms, and appraisal gap is one that can catch people off guard, especially in competitive markets. Let’s break it down in a simple, no-stress way.

An appraisal gap happens when a home’s appraised value comes in lower than the agreed purchase price. For example, if a buyer offers $550,000 for a home but the appraisal comes back at $520,000, the $30,000 difference is the appraisal gap.

Why Does an Appraisal Gap Matter?

This matters because lenders base the loan amount on the appraised value, not the offer price. That gap has to be addressed before the deal can move forward.

When there’s an appraisal gap, someone has to make up the difference. In many cases, buyers may need to bring extra cash to closing, renegotiate the price, or ask the seller for concessions. If neither side is willing to adjust, the deal could fall apart.

How Is an Appraisal Gap Handled?

There are a few common ways appraisal gaps are resolved:

Buyer covers the gap with additional cash.
Seller lowers the price to match the appraised value.
Both parties meet in the middle through negotiation.
The contract allows the buyer to walk away if an agreement can’t be reached.

Some buyers also include an appraisal gap clause in their offer, stating upfront how much of a gap they’re willing to cover.

An appraisal gap isn’t necessarily a deal-breaker, but it is something to plan for. Understanding how it works helps buyers and sellers make informed decisions and avoid last-minute surprises.

Having the right guidance can make all the difference when navigating situations like this, especially in competitive markets.

All information deemed reliable but not guaranteed. If your property is listed with a real estate broker, this is not a solicitation of brokerage services. Avenir Admin, License , Avenir Realty.

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