Appraisal gap calculator

The appraisal came in below the contract price. See what each way out costs the buyer in cash and the seller in price, side by side.

How the appraisal gap is calculated

The gap is the contract price minus the appraised value. Most lenders base the loan on the lower of the two, so the loan shrinks when the appraisal is low, and the buyer's cash has to cover both the gap and part of the down payment.

• Loan = the lower of price and appraised value × (100% − down payment %).
• Buyer's cash to close (before closing costs) = final price − loan.
• Extra cash because of the gap = loan-to-value × gap. With 20% down and a $15,000 gap, the buyer brings $12,000 more than planned if they cover the whole gap. Their 20% is now figured on the lower appraised value, so the extra is a bit less than the gap itself.

The usual ways out

• Appraisal gap coverage: the buyer agreed in the offer to pay up to a set amount above the appraisal. The price becomes the appraised value plus the covered part.
• Buyer covers the whole gap: the price stays, and the buyer brings more cash.
• Seller drops to the appraised value: the buyer's cash stays at the planned down payment on the lower price.
• Split the difference: often where the negotiation lands.

Estimates only, before closing costs, credits and prepaid items. Not lending or legal advice. FHA, VA and some other loans have their own appraisal rules, and the contract wording decides what each side must do. Check with the lender.