What Is an Appraisal Gap Guarantee in New Hampshire Real Estate?

How appraisal gap guarantees affect New Hampshire home buyers and sellers

An appraisal gap guarantee is a strategy buyers sometimes use in competitive New Hampshire real estate markets to strengthen their offer when homes are receiving multiple bids. This type of guarantee addresses the risk that a property may not appraise for the agreed-upon purchase price.

An appraisal gap occurs when the home’s appraised value comes in lower than the contract price. Because most lenders will only finance based on the appraised value, buyers are often required to make up the difference in cash or renegotiate the price.

With an appraisal gap guarantee, the buyer agrees in advance to cover all or part of the difference between the appraised value and the purchase price. For example, a buyer may offer to cover an appraisal gap of up to $15,000 if the appraisal comes in low. This assurance can make an offer more attractive to sellers, especially in fast-moving New Hampshire markets.

However, appraisal gap guarantees also carry financial risk for buyers. Agreeing to cover a gap means committing additional cash beyond the down payment and closing costs. Buyers should carefully evaluate their finances and comfort level before including this type of guarantee in an offer.

From a seller’s perspective, appraisal gap guarantees reduce the likelihood of renegotiation or deal collapse due to a low appraisal. This added certainty can make a buyer’s offer stand out, even if the purchase price is similar to other offers.

It’s important to note that appraisal gap guarantees do not change the lender’s appraisal requirements. They simply address how any shortfall will be handled if the appraisal comes in below the contract price.

Because appraisal gaps can significantly impact a transaction, buyers and sellers in New Hampshire should work closely with an experienced real estate agent to determine whether an appraisal gap guarantee makes sense for their situation.

Jim Johnson Real Estate

Phone: 857-249-7392

Serving Plymouth, Campton & Central New Hampshire

Brokered by Three Hills Real Estate Service