What is Appraisal Gap?

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Real Estate

Appraisal gap is the difference between the offer price in a home purchase contract and the appraised value as determined by a licensed home appraiser.  This has been happening a lot in our current hot sellers market.  Buyers, in an effort to compete with multiple bids on a home, are offering to buy for significant amounts above asking price.  When the appraisal comes in lower than the buyers offer price, many buyers mistakenly believe that they can choose to get out the contract without losing their deposit.  This is not always the case.  You should discuss this with your Realtor prior to making any offers.  Always read contracts carefully.  Contracts can be seem long, but there is a lot of important information contained in them.  It is also a good idea to speak with your lender.  Lenders are not in the habit of loaning more than a home is appraised for.  In a seller's market, the buyer usually ends up paying the appraisal gap out of pocket.