An appraisal gap happens when the price you agreed to pay for a home is higher than what a professional appraiser says it is worth. It can catch buyers off guard, especially in a competitive market where offers go above the asking price.

This guide explains why appraisal gaps happen, how often they actually occur, and the real options you have if it happens to you.

The Short Answer

An appraisal gap is simply the difference between your agreed purchase price and the appraised value of the home.

For example, if you agree to pay $400,000 for a home and the appraiser says it is worth $380,000, you have a $20,000 appraisal gap.

This matters most if you are getting a mortgage, since lenders base your loan amount on the appraised value, not on the price you offered.

How the Appraisal Process Works

It helps to understand what actually happens during an appraisal, since that is where the number causing your gap comes from.

• Your lender orders the appraisal once your offer is accepted. This is required for most mortgages.
• The appraiser is assigned independently, usually through an appraisal management company, so neither you nor the seller gets to pick who does the appraisal.
• The appraiser visits the home in person. This usually takes 30 minutes to a few hours, depending on the size and condition of the property.
• During the visit, the appraiser looks at the home’s size, layout, condition, and any updates or repairs, then compares it to a few recent sales of similar homes nearby, known as comps.
• After the visit, the appraiser prepares a written report with an estimate of value. This usually takes about a week, though the full process, from the day the lender orders it to the day the report is ready, can take two to three weeks depending on the appraiser’s schedule.
• The finished report goes straight to your lender, who uses it to decide how much they are willing to loan on the home.

Understanding this process makes it easier to see why an appraisal can come in below your offer. It is based on recent comps, not on how much you or another buyer were willing to pay to win the home.

Why Appraisals Come In Below the Offer

Appraisers do not set a home’s value based on what buyers are willing to pay in the moment. They look at recent sales of similar homes nearby, known as comparable sales, or comps.

In a competitive market, buyers sometimes offer more than recent comps support, just to win the home over other offers. When that happens, the appraisal can come in below the agreed price, even though both the buyer and seller were happy with the deal.

Other factors can play a role too, such as a home with unique features that are hard to compare, or a fast changing market where prices move quicker than recent sales data can keep up with.

How Often Does This Actually Happen?

Low appraisals are not as common as many buyers assume. Based on data from the National Association of Realtors, roughly 1 in 10 appraisals comes in below the agreed purchase price. Some broader industry estimates put the number closer to 1 in 5 in especially competitive markets.

A November 2025 survey from the same organization found that appraisal issues were behind about 5 percent of recent sales contract delays. So while it does happen, most home sales close without an appraisal gap ever coming up.

Your Options When the Appraisal Comes in Low

If your appraisal comes in low, you generally have a few paths forward.

Ask the Seller to Lower the Price

This is one of the most common outcomes and often the simplest. If the seller is motivated to close the sale, they may agree to reduce the price to match the appraised value. This works especially well when the seller does not want to relist the home and start the search for a new buyer over again, since that can cost them time and money too.

Split the Difference

Sometimes neither side wants to cover the full gap alone, so you meet in the middle. For example, on a $20,000 gap, you might agree to pay an extra $10,000 out of pocket while the seller lowers the price by $10,000. This can feel fair to both sides and keeps the deal moving without one party absorbing all the risk.

Bring Extra Cash to Closing

If you have the funds available, you can simply pay the difference yourself and keep the original price in place. This is often the fastest way to keep a deal together, especially in a competitive market where the seller has other offers waiting. Keep in mind this money comes on top of your down payment, so it helps to know ahead of time how much extra cash you could realistically bring if needed.

Use an Appraisal Gap Clause

If you already included an appraisal gap clause in your offer, this step is already decided. You agreed in advance to cover some or all of a shortfall up to a certain amount, so you simply follow through on that commitment. This is why it helps to think carefully about how much you are comfortable committing to before you write this clause into an offer.

Ask for a Reconsideration of Value

If you or your agent believe the appraiser used the wrong comps, missed a recent renovation, or made another error, you can ask your lender to request a second look. This is called a reconsideration of value. It does not always change the outcome, but it is worth trying if you have solid evidence, such as better comps or documentation of updates the appraiser may have missed.

Walk Away From the Deal

If your contract includes an appraisal contingency, you have the right to cancel the purchase and usually get your earnest money back. This is the safety net many buyers rely on when they are not able or willing to cover a gap. Keep in mind this only works if the contingency is written into your contract, so it is worth confirming this with your agent before you make an offer.

Which option makes sense depends on how much cash you have available, how much you want the home, and how the rest of your contract is written.

What Is an Appraisal Gap Clause?

An appraisal gap clause is a line in your offer that says you will cover some or all of the difference if the home appraises below the purchase price.

Buyers often add this clause to make their offer more appealing in a competitive market, since it tells the seller that a low appraisal will not derail the deal.

For example, a buyer might agree in writing to cover up to $10,000 of any appraisal gap. If the appraisal comes in $8,000 below the offer, the buyer covers that amount out of pocket, and the deal moves forward as planned.

This clause can make your offer stand out, but it also means you are taking on some risk before you even know if there will be a gap.

Appraisal Gap Clause or Appraisal Contingency, What’s the Difference?

These two terms sound similar, but they do opposite things.

An appraisal gap clause commits you to pay more if the appraisal comes in low. It protects the seller, since it removes one reason the deal could fall through.

An appraisal contingency protects you, the buyer. It gives you the right to walk away from the deal and usually get your earnest money back if the appraisal comes in too low and you cannot or do not want to cover the gap.

Some buyers use both together. You might agree to cover up to $10,000 of a gap with a clause, but keep a contingency in place in case the gap turns out to be much larger than that.

How to Prepare Before You Make an Offer

A little preparation can save you a lot of stress later.

• Get a strong mortgage pre-approval so you know your real budget
• Keep some extra cash in reserve in case you need to cover a gap
• Ask your agent about recent comps before you decide how much to offer
• Talk with your agent about how competitive a specific home is likely to be, since that affects how much risk you may want to take on

A Note for Bakersfield and Flathead Valley Buyers

Appraisal gaps tend to show up most in competitive pockets of a market. In Bakersfield, that can mean fast-moving neighborhoods where several buyers are competing for the same home. In the Flathead Valley, seasonal demand for vacation and lake property can push offers above what recent comps support, especially during peak buying season. A local advisor can help you understand how competitive a specific listing really is before you decide how much cushion to build into your offer.

Common Questions About Appraisal Gaps

Can the seller just lower the price instead of me covering the gap? Yes, this is one of the most common outcomes. Many sellers would rather adjust the price than risk losing the sale entirely.

Does money used to cover an appraisal gap count toward my down payment? No. Money used to cover a gap goes toward the purchase price above what the loan will cover, it does not count as part of your down payment on the loan itself.

Can I dispute a low appraisal? Yes. You or your lender can request a reconsideration of value if you believe the appraiser used the wrong comps or missed something about the home.

What if I do not have the cash to cover the gap? You can try to renegotiate the price with the seller, or walk away from the deal if you have an appraisal contingency in place.

Ready to Make a Confident Offer? Talk to an Advisor

An appraisal gap can feel stressful in the moment, but it is a manageable part of buying a home, especially with the right plan in place.

Contact the Lockhart Real Estate Advisors team before you make your next offer, so you know exactly how much risk you are comfortable taking on.