What Is an Appraisal Gap in Washington?

An appraisal gap happens when a home appraises for less than the agreed purchase price.

Because lenders will only lend based on the appraised value, the difference between the appraisal and the contract price must be resolved before closing.

This difference is called the appraisal gap.

In Washington, buyers often address this by agreeing in advance to cover the gap with additional cash using NWMLS Form 22AD.

Form 22AD Video

Watch the Additional Down Payment Form 22AD video.

What This Means for the Buyer

The buyer may need to bring extra cash to closing to make up the difference between the appraised value and the purchase price.

This money comes from the buyer’s funds — not from the loan.

What This Means for the Seller

The seller must decide whether to:

  • Reduce the price to match the appraisal
  • Ask the buyer to cover the gap in cash
  • Move to the next buyer if negotiations fail

When buyers include an appraisal gap strategy in their offer, it gives sellers more confidence the deal will close.

Why This Happens Frequently in Seattle & Snohomish County

Escalation clauses, multiple offers, and rapidly rising prices can push a purchase price beyond what recent closed sales support — which is what appraisers are required to use.

How This Connects to Other Forms

Appraisal gaps often involve:

  • Form 22A (financing contingency protection)
  • Form 22AD (buyer agrees to bring extra cash)
  • Escalation clauses (Form 35E)

Bottom Line

An appraisal gap doesn’t kill the deal, but it forces a decision about who will cover the difference between the home’s value and the agreed price.

FAQ

Can a buyer back out if the appraisal is low?

Yes, if they included Form 22A financing contingency and follow the timelines.

Can a buyer pay the difference in cash?

Yes, this is common when buyers really want the home.

Does the seller have to lower the price?

No, it’s negotiable.

What form handles appraisal gaps in Washington?

NWMLS Form 22AD is commonly used when buyers agree to cover the gap with additional cash.