An appraisal gap happens when the lender's appraiser values a home below the price you agreed to pay. The lender then lends against the appraised value, not the contract price — and the difference becomes cash you have to produce, or a problem the two parties have to renegotiate.
Example: you're under contract at $1,400,000 with 20% down. The appraisal comes back at $1,340,000. Your lender will now finance 80% of $1,340,000 — $1,072,000 — instead of 80% of $1,400,000. Your required cash goes from $280,000 to $328,000. The $60,000 gap didn't reduce the price. It moved onto your side of the table.
Your four options when it happens
| Option | What it means | What it costs you |
|---|---|---|
| Cover the gap in cash | You bring the difference to closing | The full gap, out of pocket |
| Renegotiate the price | Seller reduces to the appraised value, or you meet partway | Nothing, if the seller agrees |
| Dispute the appraisal | Submit a reconsideration of value with better comparables | Time, and it usually fails |
| Walk away | Exercise your appraisal contingency | Nothing, if the contingency is intact |
That fourth row is the one that matters most, and it's decided before you ever see the appraisal — at the moment you write the offer.
Why this is less common right now than it was
Appraisal gaps cluster in markets where buyers routinely bid above asking. In a market where homes sell at 102% of list, appraisers struggle to find comparables that support the price.
That is no longer the Eastside market. Bellevue's sale-to-list ratio is 97.2%, Kirkland's is 97.8%, Redmond's is 97.6% — all below asking as of the most recent data. When buyers are negotiating down rather than bidding up, contract prices sit closer to supportable value and gaps become less frequent.
Where they still show up:
- Unique properties with thin comparables. Waterfront, acreage, heavily customized homes, and anything where the nearest genuine comparable is a mile away and six months old.
- New construction, where the builder's price includes upgrades an appraiser may not fully credit.
- Fast-moving segments, where a well-priced home still draws multiple offers and sells above list.
- Neighborhoods in transition, where recent sales lag current demand.
The appraisal contingency, and why waiving it is a real decision
An appraisal contingency lets you exit the contract, with your earnest money, if the home doesn't appraise at or above the contract price. It is your protection against exactly this scenario.
Buyers waive it to make offers more competitive. That was close to standard practice in 2021 and 2022. In a 24-day market with sellers accepting 97.2% of asking, it is far less necessary — and waiving it now is giving away protection you probably don't need to give away.
If you do waive it, understand precisely what you've agreed to. You are committing to close at the contract price regardless of appraised value, which means committing to cover any gap in cash. If you can't, you're in default, and your earnest money — typically 2–5% of the purchase price in Washington — is at risk.
The middle path: appraisal gap coverage. Rather than waiving entirely, you can agree to cover a gap up to a stated amount. "Buyer will cover an appraisal shortfall up to $40,000" is a far more controlled commitment than waiving the contingency outright, and it reads as nearly as strong to a seller.
What sellers should know
A low appraisal is information, not just an obstacle. If an independent appraiser can't support your price with comparable sales, there is a reasonable chance the next buyer's appraiser won't either. Holding firm may simply mean re-listing and repeating the process.
You can ask for a reconsideration of value. If the appraiser used poor comparables — wrong neighborhood, wrong condition, missed a recent sale — your agent can submit a formal request with better data. Be realistic: these succeed sometimes, not usually, and they take time your transaction may not have.
Meeting partway is common and often sensible. Splitting a $40,000 gap costs you $20,000 against the cost of starting over: another month of carrying costs, more days on market accumulating on your listing, and a buyer pool that now sees a home that fell out of contract.
How to reduce the risk before it happens
For buyers: ask your agent for the comparables supporting your offer price before you write it. If the comps don't support the number, you're writing an offer with a known appraisal risk and you should price that in.
For sellers: have your pricing analysis ready for the appraiser. A packet of recent comparable sales, a list of improvements with dates and costs, and square footage documentation gives the appraiser what they need to reach the right number. This is standard practice for a good listing agent and it changes outcomes.
For both: build the timeline in. The appraisal is ordered after mutual acceptance and typically returns within the 21–30 day financing window. If it comes in low on day 25 of a 30-day contingency, you have very little room to renegotiate. Order early.
Frequently asked questions
What happens if a house doesn't appraise in Washington? Your lender finances against the appraised value rather than the contract price, so you must cover the difference in cash, renegotiate the price with the seller, dispute the appraisal, or exit using your appraisal contingency if you have one.
Who pays the difference if the appraisal comes in low? Whoever the contract says. By default the buyer covers it, because the lender simply lends less. In practice it's frequently negotiated — seller reduces, buyer covers part, or they split it.
Should I waive the appraisal contingency? Rarely, and less so now than two years ago. Eastside sellers are currently accepting below asking across Bellevue, Kirkland and Redmond, which means the competitive pressure that made waiving common has eased. If you need to strengthen an offer, appraisal gap coverage up to a stated dollar amount gives the seller most of the comfort with far less of your exposure.
How often do appraisals come in low? It varies with the market. Gaps are most common when buyers routinely bid above asking, which is not currently the case across most of the Eastside. They remain more likely on unique properties, new construction, and in fast-moving price segments.
Can I challenge a low appraisal? Yes, through a reconsideration of value — a formal request with supporting comparable sales. They succeed sometimes, not usually, and they consume days you may not have inside your financing contingency.
Does a low appraisal mean I'm overpaying? Not necessarily. Appraisals are backward-looking by design, based on sales that already closed. In a rising segment an appraisal can lag real value. In a softening one, it can be an early warning worth taking seriously.
We price offers against the comps before you write them
Most appraisal problems are visible before anyone orders an appraisal. If the recent sales don't support the number, that's knowable on day one — and it's the kind of thing we'd rather tell you before you're under contract than after.
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Tribeca NW Real Estate serves buyers and sellers across Bellevue, Kirkland, Redmond, Issaquah, Bothell and the greater Seattle metro. 1,675 homes closed and $1B+ in transaction volume. 500+ five-star Google reviews and 375+ five-star Zillow reviews.
This article is general information, not legal or lending advice. Contract terms and remedies vary. Review your specific agreement with your broker.
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