Title & Ownership April 7, 2023

Appraisal Gap Coverage or Guaranteed Appraisal

Hello, South Denver Metro homeowners and prospective sellers! I’m Stacie Duffy, your go-to Denver Metro Real Estate Resource. With the 4th of July just around the corner, let’s dive into a crucial topic for today’s seller’s market: Appraisal Gap Coverage or Guaranteed Appraisal. This strategy is vital in making informed decisions when selling your home, especially in a rapidly appreciating market.

Understanding Appraisal Gap Coverage: Appraisal gap coverage is a term you might hear from your realtor or from friends who recently bought a house. It’s a strategy used in multiple offer situations, particularly beneficial in seller’s markets like we’re experiencing. In essence, it’s an “insurance policy” for the property’s appraised value.

Why It’s Important: In markets where property values are rapidly increasing, appraisers face challenges in justifying the rising prices. They compare your property to similar ones that sold recently—usually within the last six months. If the market is appreciating quickly, the appraisal may fall short of your escalating sale price. This is where appraisal gap coverage comes into play.

How It Works: As a seller, you might encounter a buyer’s offer that includes a clause about appraisal gap coverage. This means if the appraisal comes in lower than the purchase price, the buyer agrees to cover a certain amount of the difference, up to a pre-agreed limit. This could range from a few thousand dollars to covering the entire gap. Remember, the lender will only lend against the appraised value. If the appraisal is low, the buyer’s offer of gap coverage can be a deciding factor in accepting their offer over others.

Strategic Advantage in a Seller’s Market: In a seller’s market, where multiple offers are common, having a buyer willing to provide appraisal gap coverage can be a game-changer. It offers peace of mind, knowing that even if the appraisal falls short, the agreed-upon sale price is more likely to be met. When evaluating offers, consider the strength of the appraisal gap coverage clause. A strong offer with significant gap coverage can be more attractive, even compared to higher offers with no such coverage.

As a seller in the South Denver Metro area, it’s important to understand the dynamics of the current market, especially regarding appraisals. Discussing with your realtor about how to handle potential appraisal gaps can be crucial in getting the best deal for your property. If you’re planning to sell your home and want to navigate these complexities with ease, I’m here to help. For more information or to book a Home Seller Consultation, visit www.calendly.com/RealtorStacie or call me at 720-295-9089. Feel free to drop any questions or comments below, and I’ll be happy to address them. Happy house hunting and here’s to a successful sale!

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