What is an 'Appraisal Gap' Clause?

When inventory is low, bidding wars drive prices up—often higher than the recent comparable sales support. This leads to a "Low Appraisal."

The Gap Problem

If a home is listed at $600k, and the buyer offers $650k, but the appraiser determines the value is only $610k... who pays the $40k difference? Lenders will only base the loan on the $610k value.

The Gap Coverage Solution

Smart agents are writing "Appraisal Gap Clauses" into offers. This states that the buyer agrees to pay cash for the difference (up to a certain limit) if the appraisal comes in low.

Example: "Buyer agrees to pay up to $10,000 above appraised value, not to exceed purchase price."

This assures the seller that the deal won't fall apart over a tight valuation.