Appraisal gaps return when buyer demand outpaces comparable sales data -- as happened in the summer 2020 hot market, where buyers bidding $550K on homes that appraised at $510K faced $40K shortfalls. When this happens, you either cover the gap in cash, renegotiate the price, or walk away with your contingency.
Why Appraisal Gaps Happen
Buyer behavior outpaces comparable sales data.
When buyers bid up to $550k but recent sales show $510k value, appraisal reflects reality: $510k.
Buyer overpaid relative to market.
Buyer Dilemma
With appraisal gap, buyer faces choice:
- Make up gap in cash ($40k)
- Renegotiate price down
- Walk away (if appraisal contingency in place)
No good options.
Frequency in Hot Market
Summer 2020: Appraisal gaps on 15-20% of transactions.
Bidding wars create gaps as buyers pay premiums over comparables.
Going Forward
Appraisal gaps likely in continued hot market. Buyers must understand contingency risks.
---
Appraisal gap? Protecting yourself in hot market. Contact me.