So, What’s An Apprisal Gap Anyway?!!

January 13, 2021

In Denver and any market with fierce competition, you likely have to put in offers well over the asking price. While sellers may be over the moon, the contract’s success is heavily based on the appraisal. So, what is, and why would you want to include an appraisal gap anyway?!

An appraisal gap works to help cover the difference between what the property is under contract and what it appraises for. In a busy market, with homes going well over asking, sellers want to see some sort of reassurance that they will get this price upon closing.

For buyers, you can only get a loan for the amount the property appraises at. For example, you are under contract at $450,000. The property was listed at $425,000, and the appraisal comes in at $440,000. This means there is a $10,000 gap between the contract price and the appraised amount. If you have the verbiage in our contract, you will help bridge this $10,000 gap.

When you write an offer with appraisal gap verbiage, you have to be ready to use that amount. Whether you write a $5,000 appraisal gap, a $40,000 appraisal gap, or even unlimited, you’ve got to aware that should the property not appraise, you are on the hook for the noted amount.

In my experience, especially in a hot market, appraisals tend to come in at value even at high over-asking prices. However, this is the risk you take when you have gap verbiage.

What makes offers strong is the appraisal gap language. The sellers want to guarantee they will get their money, and it is often the factor that tips the scale from one offer to the next.

While it might not be the right situation for every property or every buyer, it is a tactic that can give you offer that little extra sauce to get it accepted!

You want to make sure that you are making a smart financial decision, and having that conversation with your amazing Realtor will shed light on wheater this is an excellent route to go or not!

Happy house hunting!

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