What Options Do You Have for Handling an Appraisal Gap?

Here’s how we’re handling appraisal gap issues in this market.

In today’s market, buyers are facing issues when it comes to appraisals. We run into appraisal gaps frequently, and in order to win a home, buyers are willing to pay above and beyond what an appraiser thinks a home is worth. An appraisal is a third-party opinion of a home’s value that’s usually completed on behalf of the buyer’s lender.

The best way to avoid an appraisal gap is by hiring an agent who is pulling comparables and knows where we can expect the home to appraise. In today’s market, buyers are going above and beyond the asking price to win, but the problem is that the bank won’t lend them that price. They will only lend the appraised value. If an appraisal gap occurs, it's important to know that you do have options.

One option is for you to make up the gap between the appraised value and the agreed-upon contract price in cash. Let’s say you offer $325,000, but the appraisal comes in at $300,000. Then you would come to the closing table with an additional $25,000 to get the contract to closing.

“It’s important to know that you do have multiple options.”

If you don’t have that cash on hand to cover your down payment, closing costs, and the appraisal gap, there are different options. You could attempt to renegotiate the purchase price. In a competitive market like this, it’s not the best strategy, but it doesn’t hurt to try to get them to reduce the price a little or meet you in the middle.

Another option is to leave the price where it is, go to your lender, and restructure your loan. Maybe you can put less money down in order to offer more in cash. It’s almost like rolling the appraisal gap into your mortgage. You aren’t coming to the table with any more money, but you do have the opportunity to bridge that appraisal gap.

If you have any questions for me about appraisal gaps or anything else related to real estate, don't hesitate to reach out via phone or email. I look forward to hearing from you soon.



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