Appraisal Gap: Do’s and Dont’s

An appraisal gap in a real estate purchase occurs when the appraised value of the property is lower than the offer price. So, this can happen in a competitive real estate market like Cincinnati.

For example, let’s say a buyer agrees to purchase a home for $500,000. The appraiser determines that the fair market value of the property is only $475,000. This creates an appraisal gap of $25,000. Two things can happen in this situation. One, The buyer may have to come up with the additional $25,000 in cash to cover the gap. Two, the buyer and seller may need to renegotiate the purchase price.

Gaps can be a challenge for buyers and sellers alike. For buyers, an appraisal gap can mean having to come up with more money than anticipated. When this happens it can potentially put the purchase out of reach. For sellers, a gap can result in the deal falling through or having to accept a lower purchase price.

Avoid the Gap

To avoid a gap, it’s important for buyers and sellers to have a realistic understanding of the fair market value of the property. Buyers should consider getting a pre-purchase appraisal, while sellers may want to have an appraisal done before listing the property.

https://www.nerdwallet.com/article/mortgages/appraisal-gap

In conclusion, an appraisal gap is the difference between the appraised value of a property and the purchase price agreed upon by the buyer and seller. It can create challenges for both parties, but can be avoided with proper preparation. An experienced real estate agent can make all the difference. Contact us today.

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For buyers, due diligence is key. For sellers, pricing is critical for a smooth transaction. Have questions about the Cincinnati real estate market? I’d be happy to help. Connect on Facebook, Instagram, or text/call. For us, it’s about loving the journey home.