What Is a Home Appraisal Gap Clause in NH Real Estate?

🏡 What Is a Home Appraisal Gap Clause in NH Real Estate?

In competitive markets across Plymouth, Campton, Thornton, Rumney, and Central NH, buyers often face bidding wars where homes sell above asking price. When this happens, the appraisal doesn’t always match the contract price — which can cause major financing issues.

That’s where an appraisal gap clause comes in.

Here’s how it works and why buyers are using it in today’s NH market.

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What Is an Appraisal Gap Clause?

An appraisal gap clause is a buyer’s written agreement to cover the difference between the appraised value and the offer price, up to a set amount.

This helps reassure sellers that the deal will not fall apart if the appraisal comes in low.

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Why Buyers Use Appraisal Gap Clauses

Common reasons include:

✔ Competing against multiple offers

✔ Making their offer stand out without waiving protections

✔ Giving sellers confidence the deal will close

✔ Working around aggressive list prices

In strong seller’s markets, gap clauses can be the deciding factor.

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How an Appraisal Gap Works

Example:

Home under contract for $420,000

Appraisal comes in at $400,000

Buyer included a $10,000 appraisal gap clause

The buyer would cover $10,000 of the shortfall, and the lender finances based on the appraised value.

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How Much Should the Gap Be?

Typical NH appraisal gaps range from:

• $5,000 – $25,000 on standard residential homes

• Higher gaps possible for premium properties

Gap size depends on:

• Buyer’s available cash

• Market competitiveness

• Seller expectations

• Buyer’s loan type

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Does an Appraisal Gap Replace an Appraisal Contingency?

No — not usually.

Most NH buyers keep the appraisal contingency, but add a gap clause to show strength.

If the shortfall is more than the agreed gap, buyers can still renegotiate or withdraw.

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Risks Buyers Should Know

Buyers must understand:

• You need the cash to cover the gap at closing

• Larger gaps create more financial exposure

• Some loan types restrict how gaps are structured

• Sellers may still negotiate if the appraisal is drastically low

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Benefits for Sellers

Sellers gain:

✔ More security the deal won’t fall apart

✔ Stronger offers from qualified buyers

✔ Less risk of renegotiation after appraisal

Gap clauses give sellers major confidence in a volatile market.

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Keywords

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Jim Johnson — Real Estate Agent

58 NH Route 25A

Wentworth, NH 03282

P: (857) 249-7392

W: www.JimJohnsonRealEstateAgent.com

Licensed New Hampshire REALTOR® with Three Hills Real Estate Services

Broker Email: info@ThreeHillsRES.com

Broker Website: www.ThreeHillsRES.com