Before you can get a mortgage to buy a home, your lender’s appraiser typically must agree that the home is worth at least as much as the sales price. If the home appraisal value comes up short, a situation called an appraisal gap is created, and you won’t be able to secure your loan for your purchase until the gap is resolved. This situation is rare, but in today’s hot real estate market, it’s becoming more common. Here are four ways you can close an appraisal gap if it arises.

  1. Dispute the appraisal

Although it’s not easy, successfully disputing an appraisal is often the only way to close an appraisal gap without you or the seller having to concede anything. To submit a dispute, you must be able to show in writing that the appraiser didn’t use appropriate comparable home sales data, missed important features of the home, included mistakes in their report or only conducted a drive-by or exterior appraisal. Your lender should be able to advise you on this strategy. If you’re successful in getting the appraisal report revised to a higher value, it may close some or all of the appraisal gap.

  1. Renegotiate the offer

Another potential solution to closing an appraisal gap is negotiating with the seller to lower the sales price. However, since the U.S. is currently in the midst of a seller’s market where many homes are receiving bids from multiple buyers, the average home seller may be unwilling to lower their price. And, if you don’t have an appraisal contingency in your contract that allows you to back out of the deal due to the appraisal gap, the seller may be even less likely to negotiate. Ideally, you would want the seller to agree to a sales price that matches the appraisal price, but any amount they agree to lower their price will help you close the gap. Your real estate team can advise you on this strategy.

  1. Explore a financing solution

Your lender may also be able to help you close an appraisal gap. This is typically done by reallocating some of your down payment amount toward covering the gap. This strategy usually requires you to pay extra for mortgage insurance, but any upfront cost should be a fraction of the appraisal gap’s amount. Your lender can advise you on the cost and viability of this strategy.

  1. Pay the difference in cash

If you have no other options, and you still want to go ahead with your purchase, it may be up to you to pay the full appraisal gap amount in cash. For example, if your appraisal came up $15,000 short of the sales price, you would likely need to pay $15,000 extra in addition to your down payment and closing costs.


Thankfully, appraisal gaps are still relatively uncommon, but they’re one of several potential roadblocks that can arise during the home financing process. That’s why we at Draper and Kramer Mortgage specialize in a wide range of mortgage options to help our clients keep their home financing plans on track. If you’re planning to finance a home and would like a free mortgage consultation or preapproval, please get in touch today.