Home Buying

What Is an Appraisal Gap?

An appraisal gap is the difference when a home appraises for less than the agreed purchase price. Because lenders generally base the loan on the lower of the price and the appraised value, the buyer may need to pay the gap in cash, renegotiate the price, or use an appraisal contingency to cancel.

Example

If the price is 400,000 and the appraisal is 380,000, the gap is 20,000. With a 90% loan-to-value loan, the lender lends based on 380,000.

Appraisal Gap Clauses

Some buyers agree in advance to cover a gap up to a set amount to make their offer more competitive.

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🔗 Related Terms

Home Appraisal Real Estate Contingency Loan-to-Value Ratio (LTV) Down Payment

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.