What Is Form 22AD — Increased Down Payment (Appraisal Gap) Addendum in Washington Real Estate?
Form 22AD is the Increased Down Payment Addendum used in Washington real estate offers when buyers agree to cover part of a potential appraisal gap.
In competitive markets, sellers worry about offers falling apart if the property appraises below the purchase price. Form 22AD addresses this risk by allowing buyers to guarantee they will bring additional cash to closing if the appraisal comes in low.
This addendum is commonly referred to as an “appraisal gap clause.”
Form 22AD is typically attached to the Purchase and Sale Agreement (Form 21) and often works together with the Financing Contingency (Form 22A).
Video: Form 22AD Appraisal Gap Addendum Explained
Why Form 22AD Exists
Mortgage lenders base loan amounts on the appraised value of the home, not the purchase price.
If a buyer offers more than the appraised value, the lender may reduce the loan amount.
For example:
- Purchase price: $750,000
- Appraised value: $720,000
The lender will typically base the loan on $720,000, not the contract price.
Without additional cash, the transaction could fail.
Form 22AD solves this problem by allowing the buyer to commit to covering the difference.
How the Appraisal Gap Addendum Works
Form 22AD allows the buyer to guarantee they will increase their down payment if the appraisal comes in low.
The form typically specifies:
Maximum additional amount
The buyer states how much additional cash they will bring to closing if needed.
Appraisal shortfall protection
If the appraisal is lower than the purchase price, the buyer covers the gap up to the stated amount.
Seller confidence
This reduces the seller’s risk that the transaction will collapse because of a low appraisal.
Example of an Appraisal Gap
A buyer submits an offer with:
- Purchase price: $800,000
- Appraisal gap guarantee: $30,000
If the appraisal comes in at $775,000, the buyer agrees to bring $25,000 additional cash to closing.
If the appraisal comes in below the gap amount, the buyer may still have options depending on how the financing contingency is structured.
Why Sellers Like Form 22AD
When reviewing multiple offers, sellers often prefer offers that include appraisal gap protection.
It provides confidence that:
- the buyer has sufficient funds
- the deal is less likely to fail
- the final price is more secure
In competitive markets like Seattle and Snohomish County, appraisal gap guarantees are a common strategy to strengthen an offer.
Risks Buyers Should Understand
Although Form 22AD can make an offer stronger, buyers should understand the financial commitment involved.
If the appraisal comes in low, the buyer must bring additional cash to closing.
That money cannot typically be financed through the mortgage loan.
Because of this, buyers should confirm they have sufficient funds before including this addendum in an offer.
Why Form 22AD Matters in Competitive Markets
Low appraisals are one of the most common issues that cause real estate transactions to fail.
Form 22AD helps prevent this by giving sellers confidence that the buyer can cover an appraisal gap.
Understanding how appraisal gap addenda work helps buyers structure stronger offers and helps sellers evaluate risk when choosing between competing offers.
You can explore the full library of Washington real estate process explanations here.
Bottom Line
Form 22AD is the Increased Down Payment Addendum used in Washington real estate offers. It allows buyers to guarantee they will bring additional cash to closing if the property appraises below the purchase price.
FAQ
What is Form 22AD in Washington real estate?
Form 22AD is the Increased Down Payment Addendum used in Washington real estate offers. It allows buyers to guarantee they will bring additional cash to closing if the home appraises below the purchase price.
What is an appraisal gap?
An appraisal gap occurs when the appraised value of a property is lower than the agreed purchase price.
Do buyers have to use Form 22AD?
No. Buyers choose whether to include the appraisal gap addendum when making an offer.
Why do sellers like appraisal gap clauses?
They reduce the risk that the transaction will fail if the property appraises below the purchase price.
Can buyers finance the appraisal gap?
Typically no. Buyers must usually bring additional cash to closing to cover an appraisal gap.