What is an appraisal gap?
An appraisal gap is when the home appraises below your contract price. The lender bases the loan on the lower appraised value, so the difference needs covering — extra cash, renegotiation, or an appraisal contingency exit. 'Gap coverage' in offers is a promise to pay it.
An appraisal gap is the space between the price you agreed to pay and the value the lender's appraiser assigns. It matters because your loan is sized against the appraised value, not the contract price — so a gap leaves real dollars needing a home.
A quick example
You're under contract at $400,000; the appraisal comes in at $390,000. The lender now lends against $390,000, and roughly $10,000 has to be resolved — by someone, somehow, before closing.
The three resolutions
Bring extra cash to cover the difference. Renegotiate — a low appraisal is documented leverage, since the seller knows the next buyer's appraiser may well agree. Or, if your contract includes an appraisal contingency, exit with your deposit. Which path has power depends on the market and the deal — and what to do when it actually happens is its own playbook.
"Appraisal gap coverage" in competitive offers
In bidding wars, buyers sometimes promise in advance to cover a gap up to a stated amount. It strengthens the offer precisely because it's a real financial commitment — which is why it should never go in writing unless your cash could honor every dollar of it. That's a decision we make together, eyes open, before it's offered.
The best protection is upstream: an offer built on the comps rarely meets a shocked appraiser. Evidence in, drama out.
This answer is general education, not legal, tax, or financial advice. Your situation is unique — let's talk through the specifics together.