Appraisal Coverage

A lot of buyers are growing frustrated with submitting offer after offer and consistently getting beat out. I can tell you from the perspective of a realtor, the best bet is to offer appraisal coverage in the offer. What’s appraisal coverage? When a house does not appraise for what the seller is asking (the bank will not loan the difference), the buyer offers to pay the “gap” aka appraisal gap. It’s not as crazy as it sounds. Here’s how to cover the gap with the same money you already have. House is listed for $300k. Assume the house is not going to appraise for $300k. As a buyer you have 10% to put down ($30,000). Instead of putting down 10%, put down 3.5% ($9,000). That leaves $21,000 that could be used gap the appraisal. If the house does appraise at $300K then your offer is $321k. If the house doesn’t appraise, you have $21,000 to make up the difference.