Appraisal gap coverage
A promise by the buyer to pay some or all of the difference in cash if the appraisal comes in below the price. It makes an offer stronger but means bringing more money to closing.
Also called: appraisal gap, appraisal gap guarantee, gap coverage
Related terms
A contract term that lets the buyer renegotiate or cancel if the home appraises below the purchase price. It matters most when a lender bases the loan amount on the appraised value.
When the appraised value comes in below the contract price. The buyer may need to bring more cash, renegotiate, challenge the value, or use an appraisal contingency to exit.
An offer term that automatically raises the buyer's price by a set amount above any competing offer, up to a cap. Sellers usually need to show the competing offer to trigger it.
The value the appraiser puts on the home in the report. Lenders base the loan on the lower of this number and the purchase price.
The total amount the buyer must bring to closing, usually the down payment plus closing costs minus earnest money and any credits. The final figure is on the Closing Disclosure.