What is the Appraisal Gap Calculator?

The Appraisal Gap Calculator estimates potential gaps between purchase price and appraised value, helping buyers prepare for possible shortfalls.

What causes appraisal gaps?

Gaps occur when buyers pay above market value in competitive situations. Appraisers use past sales data that may not reflect current bidding wars.

How do buyers cover appraisal gaps?

Buyers can pay the difference in cash, renegotiate price, request seller credits, or include appraisal gap coverage in their offer.

Should buyers always offer appraisal gap coverage?

Gap coverage strengthens offers in competitive markets. Advise based on buyer's cash reserves, market conditions, and property value confidence.

Free Tool

Appraisal Gap Explainer

Help your clients understand appraisal gaps with visual explanations, calculate their options, and develop negotiation strategies.

How Appraisal Gaps Happen

A step-by-step visual explanation

Offer Accepted

Buyer and seller agree on a purchase price.

Appraisal Ordered

Lender requires an independent appraisal to verify property value.

Appraisal Comes In Low

Appraiser determines the home is worth less than the agreed price.

Gap Created

The difference between contract price and appraised value is the "gap."

Action Required

Buyer, seller, or both must decide how to handle the shortfall.

Visual Example

Understanding the gap in numbers

Contract Price

$550,000

What buyer agreed to pay

Appraised Value

$525,000

What appraiser says it's worth

Appraisal Gap

$25,000

The difference that must be addressed

Why does this matter? The lender will only base the loan on the appraised value, not the contract price. In this example, if the buyer planned a 20% down payment, they would need to bring an additional $25,000 cash to closing to cover the gap.

Common Questions

Why do appraisals come in low?

In hot markets, home prices can rise faster than comparable sales data. Appraisers must use recent closed sales, which may not reflect current bidding wars or market conditions.

Can we use a different appraiser?

Generally no. The lender orders the appraisal through an Appraisal Management Company (AMC). However, you can request a reconsideration of value with additional data.

What is an appraisal gap clause?

This is a contract provision where the buyer agrees upfront to pay a certain amount above the appraised value. Common in competitive markets to make offers more attractive.

Does paying above appraisal mean I'm overpaying?

Not necessarily. Appraisals are backward-looking based on past sales. In appreciating markets, paying above appraisal may still be a sound investment if you plan to hold long-term.

How It Works

1. Enter Values

Input the contract price, appraised value, and down payment percentage.

2. Review Options

See calculated gap amount and explore negotiation strategies for buyers and sellers.

3. Communicate

Use provided scripts to explain the situation and negotiate with confidence.

Frequently Asked Questions

The Best Free Appraisal Gap Calculator and Explainer

Appraisal gaps are one of the most common challenges in today's competitive real estate market. Our free appraisal gap calculator and explainer helps agents educate clients about this important topic and navigate negotiations when appraisals come in low.

Why Appraisal Gaps Happen

In hot markets, home prices often rise faster than comparable sales data can reflect. Since appraisers must use recent closed sales, their valuations may lag behind current market conditions. This is especially common during bidding wars where buyers pay premiums to secure properties.

Educate Clients with Confidence

Our visual explanations and ready-to-use scripts help you clearly communicate what an appraisal gap means, what options are available, and how to move forward. Whether you represent buyers or sellers, having these tools at your fingertips makes difficult conversations easier.

Navigate Negotiations Successfully

Understanding all the options available when an appraisal gap occurs is essential for successful negotiations. From renegotiating the price to splitting the difference to challenging the appraisal, our tool walks you through each strategy with practical tips and professional communication templates.