Appraisal Gap

An appraisal gap is when the sale price of the home is higher than what the home actually appraised for. 

 

The problem when this happens is the Lender is requiring some percentage of a down payment to be paid by the borrower and the difference is the amount the Lender will approve for a mortgage amount. If the sale price is higher than the appraisal, there will be a deficiency in the amount needed to satisfy a mortgage based on the appraised price and not the contract price. 

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The Buyer can terminate the contract due to the home not appraising to the sale price or they can choose to fill that gap by putting down a larger down payment to fill the gap needed to meet the approved mortgage amount which is now being refigured by the Lender based on the appraisal of the home.