Appraisal Gap
Direct definition
An appraisal gap is the difference between a home's contract price and its lower appraised value, which a lender typically won't finance.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
When an appraisal comes in below the agreed purchase price, that shortfall is called the appraisal gap. Lenders generally base loan amounts on the lower of the sale price or appraised value, so the buyer, seller, or both must find a way to bridge the difference for the deal to move forward as originally written.
Why it matters
In competitive markets, buyers may need extra cash or a renegotiated price to keep the transaction alive, so understanding this risk before bidding matters.
Where you may see it
- Purchase agreement
- Appraisal report
- Loan Estimate
A real-world example
Educational and illustrative only
A common misunderstanding
An appraisal gap is not the same as an appraisal contingency waiver, though buyers sometimes combine gap coverage with waived contingencies to strengthen an offer.
Frequently asked
Who typically pays an appraisal gap?+
It varies by negotiation — the buyer, the seller, or a shared arrangement, depending on market conditions and contract terms.
Can a low appraisal be challenged?+
Buyers or lenders can sometimes request a reconsideration of value with supporting comparable sales, though outcomes vary.
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- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026