understanding it
What a low appraisal actually does
When a home appraises below your contract price, your lender does not walk away. It re-anchors the loan: the lender lends against the lesser of the price and the appraised value. Your down payment percentage now applies to the appraised value, and everything above the capped loan is yours to bring in cash if you hold the price. This calculator computes that real number, which is smaller than the gap itself.
The arithmetic: max loan equals your financed share of the appraised value. Your cash before closing costs equals the price minus that loan. The additional cash the gap forces is the difference between that figure and what you would have paid had the home appraised at the price. At 20% down, the extra cash works out to 80% of the gap, because your down payment was covering the other 20% already.
Why the myth matters
The version you hear in a bidding war is that a low appraisal means paying the gap in cash, full stop. Sellers benefit from that framing; it makes waiving protection sound like the only serious posture. The real number is your loan-to-value share of the gap, and knowing it changes negotiations. A buyer who knows a $15,000 gap costs them $12,000, and that a $7,500 price reduction splits that burden with the seller, negotiates with arithmetic instead of fear.
Before you waive anything
An appraisal contingency is the exit: if the home appraises low and the seller will not renegotiate, you leave with your earnest money. Waiving it, or capping it with gap-coverage language, converts that exit into a cash obligation. Run the number at an appraisal you can imagine, not just the one you hope for, and decide whether that cash exists before the offer goes in. In a competitive market this calculator pairs with the escalation clause calculator: escalation raises your price, and every dollar of escalation above the appraised value is a dollar of gap.
Common questions
Do I have to pay the whole gap in cash?
No, and this is the most repeated myth about appraisal gaps. The lender lends a percentage of the appraised value instead of the price, so the extra cash a gap forces is your loan-to-value percentage applied to the gap, not the full gap. At 20% down, a $15,000 gap forces $12,000 of extra cash, not $15,000.
What are my options when the appraisal comes in low?
Four, broadly: renegotiate the price down toward the appraised value, bring the extra cash and hold the price, split the difference with the seller, or exit under an appraisal contingency if your contract has one. Which of these you can actually use depends on the contingencies you wrote into the offer.
What is an appraisal gap guarantee?
Language in an offer promising the seller you will cover some or all of a gap between the price and the appraised value. It makes an offer stronger and riskier at the same time. This calculator shows the cash that promise could require before you make it.
Can I challenge a low appraisal?
You can ask your lender for a reconsideration of value with comparable sales the appraiser missed. Reconsiderations succeed sometimes, not usually, and the timeline is tight. The dependable protections are the contingency you wrote and the cash you planned.