“Appraisal gap” has become a buzzword—and for good reason. In competitive markets, contract prices can outrun recent closed sales. When that happens, the appraisal may come in lower than the contract price, creating a gap that buyers, sellers, and agents need to navigate.

What is an appraisal gap?

An appraisal gap occurs when the appraised value is less than the contract price. Appraisers determine market value based on evidence—primarily recent closed, comparable sales. They do not validate what one buyer was willing to pay if the market data doesn’t support it.

Why gaps appear in hot markets

• Bidding wars & escalation clauses push contracts above the level of recent closed comps.
• Timing lag: Closed sales reflect contracts written weeks ago, not today’s demand.
• Concessions & terms in competing offers can cloud headline prices.

What appraisers actually do (and don’t)

• Do: Analyze recent, relevant closed comps; make market-supported adjustments (condition, GLA vs. below grade, amenities, location/context, time/market conditions); and document the reasoning.
• Don’t: “Make the deal work” by matching the contract price or guessing at value without support.

Options when there’s a gap

1. Buyer brings cash to cover the difference.
2. Renegotiate price and/or terms to align with market-supported value.
3. Reconsideration of Value (ROV) with better data: truly comparable closed sales, verified measurements/permits, overlooked features, or corrections to factual errors. (Keep it concise and evidence-based.)

How agents can prevent (or at least tame) surprises

• Prep a data packet up front:
  • Recent, truly comparable closed sales (not just list prices).
  • Offer context: number of offers, escalation language, contract date.
  • Concessions and terms that affected net price.
  • Strong pendings/actives to show direction (supporting context—not replacements for closed comps).
  • Measurements/permits and a concise upgrades list with dates.
• Set expectations with buyers and sellers that gaps are possible in fast markets—and outline the plan (cash, renegotiate, or ROV).

ROV best practices (if you challenge the value)

• Keep it to 3–5 strongest comps that truly match the subject.
• Explain why each is comparable and what adjustment it informs.
• Provide verifiable docs (permits, measurements, contract terms) and avoid opinion-only arguments.
• Be professional and specific; the aim is clarity, not pressure.

Key takeaways

• Appraisal gaps are common in accelerating markets.
• Appraisers must follow the evidence, not the contract price.
• Your playbook: cash, renegotiate, or ROV with better data.
• The best defense is preparation—clean comps, clear context, and documented facts.

Questions or a tricky file?
Visit nationwideamc.com and use Contact Us to reach our valuation pros.

‍