You won a great home in 85018 and then the appraisal comes in low. Now what? If you are like most buyers and sellers here, you want clarity fast so the deal stays on track. Appraisal gaps are common in competitive pockets, but you can plan for them and move forward with confidence. In this guide, you’ll learn what an appraisal gap is, why it happens in the 85018 micro‑market, how to structure gap coverage, and the practical steps to keep your closing on course. Let’s dive in.
What is an appraisal gap?
An appraisal gap is the difference between your contract price and the value your lender’s appraiser assigns when the appraisal is lower than the price you agreed to pay. Lenders base loan amounts on the appraised value, not the contract price. If the appraisal is short, the buyer must bring extra cash, the parties renegotiate, or the deal can fall apart.
The lender orders the appraisal and typically charges the borrower for it up front. This is a third‑party valuation directed by the lender. You do not get to pick the appraiser for a lender‑ordered appraisal.
Why gaps happen in 85018
In tight, high‑demand micro‑markets, multiple offers can push contract prices above list. If recent closed sales have not caught up to current demand, the appraised value may trail the price buyers are willing to pay. Renovations and new construction can also outpace nearby comparable sales.
Appraisers rely on closed comps, often from the last three to six months. In a fast‑moving area, it can be hard to find enough recent closings that support a higher price. Small ZIP‑level markets like 85018 can have thin comp sets, which increases the chance that a valuation lands below the contract price.
How appraisals affect your loan
Lenders will not increase loan proceeds above the appraised value. For example, if you planned to put 20 percent down on a $350,000 home, then the appraisal comes in at $340,000, the lender recalculates your loan from $340,000. You either bring extra cash to keep the original price or negotiate a change in price or terms.
Loan program rules matter. Some conventional loans may qualify for appraisal waivers or desktop options, which can reduce appraisal risk, but waivers are not guaranteed. FHA and VA loans typically require a full appraisal and have minimum property standards. If the appraisal is low, those programs do not offer waivers. Jumbo loans often require full interior appraisals and can be stricter.
Ways to structure gap coverage
You can write offers that anticipate appraisal risk. Each option shifts risk and signals strength differently. Work with your agent and lender to choose an approach that fits your finances and comfort level.
Flat dollar coverage
You agree to pay a set amount if the appraisal is short.
- Pros: Simple, caps your exposure.
- Cons: The cap may be too small in a fast market.
Illustrative language: “Buyer agrees to pay up to $10,000 of any shortfall between the contract price and lender’s appraisal.”
Percentage coverage
You agree to cover a percentage of the shortfall, often up to a maximum.
- Pros: Scales with price.
- Cons: The percentage might be too high or too low for your risk tolerance.
Illustrative language: “Buyer agrees to pay up to 5 percent of the contract price toward any appraisal shortfall.”
Full coverage
You agree to cover the entire shortfall in cash.
- Pros: Strongest in multiple‑offer situations.
- Cons: Highest buyer risk and liquidity need.
Escalation plus a cap
You escalate to beat competing offers up to a maximum price, then cap your appraisal coverage at a set amount.
- Pros: Competitive while controlling maximum exposure.
- Cons: Requires precise wording and careful math.
Illustrative language: “Buyer’s offer will escalate to beat any bona fide higher offer by $3,000 up to a maximum price of $X. Buyer agrees to cover appraisal shortfall up to $Y.”
Increased earnest money
You put more money down as earnest money, or make a portion non‑refundable per contract terms, to show commitment.
- Pros: Increases seller confidence.
- Cons: If you cannot close, you may risk some or all of that deposit depending on contingencies.
Larger down payment or cash
You increase your down payment so the lender’s loan amount is a smaller share of the price.
- Pros: Reduces the chance of a deal‑killing shortfall.
- Cons: Requires more cash on hand.
Waive the appraisal contingency
You remove the appraisal safety net.
- Pros: Very attractive to sellers.
- Cons: High risk unless you are all‑cash or fully prepared to cover a shortfall.
Seller concessions or renegotiation
You pre‑plan a path to revisit price or terms if the appraisal is low.
- Pros: Creates a fair process to solve a gap.
- Cons: Less certainty for the seller.
Have an Arizona‑licensed broker or attorney draft final language to fit the Arizona Residential Resale Real Estate Purchase Contract and your specific situation.
Appraisal vs. financing contingencies
An appraisal contingency lets you renegotiate or cancel if the appraisal is low. A financing contingency is broader. It addresses your ability to obtain a loan approval. Waiving the appraisal contingency raises your risk because you may be required to add cash or risk losing earnest money if you do not close.
“As‑is” relates to property condition. It does not eliminate appraisal requirements or appraisal risk.
Buyer strategies in 85018
- Get a strong pre‑approval, not just a pre‑qualification. Ask your lender about the likelihood of an appraisal waiver for your profile.
- Price check early. Consider an independent appraisal or a broker price opinion right after going under contract so you can move quickly if there is a gap.
- Cap your exposure. If you offer gap coverage, set a clear dollar cap that matches your comfort and cash reserves.
- Use a smart escalator. Pair an escalation clause with a firm appraisal coverage cap and a maximum price.
- Be realistic about loan type. FHA and VA buyers should be cautious about waiving appraisal protections unless they have the cash to cover a gap.
Seller strategies in 85018
- Request proof of funds for any buyer who waives appraisal or offers full coverage. Verify that funds match the promised coverage.
- Favor offers with higher down payments or clear, capped gap coverage. These buyers are less likely to fall out if the appraisal lands short.
- Build in a cure period. Allow time after the appraisal for the buyer to add cash or for both sides to agree on a revised price.
- Set clear deadlines. Require timely scheduling and response windows for appraisal review so you are not left waiting.
If the appraisal comes in low
A low appraisal is not the end. You have options and a short timeline to decide.
- Renegotiate price or terms. Many parties meet in the middle to keep the deal alive.
- Bring additional cash to closing. The buyer covers part or all of the gap.
- Ask for a reconsideration of value. Your agent can submit better comps and market data to the lender to review with the appraiser. Results vary, so do not rely on this alone.
- Seek a second appraisal. This requires lender approval and extra time and cost. It is not guaranteed.
Example numbers
Here are two simple scenarios to show how the math works.
Example A, conventional loan
- Contract price: $350,000
- Appraised value: $340,000, shortfall $10,000
- Buyer agreed to cover up to $8,000 of any shortfall.
- Buyer planned 20 percent down. Original plan was $70,000 down and a $280,000 loan.
- Lender recalculates loan at 80 percent of $340,000. New loan is $272,000.
- The gap between the planned loan and the lender’s loan is $8,000, which the buyer covers per agreement. The remaining $2,000 needs a seller concession or more buyer cash.
Example B, FHA loan
- Contract price: $275,000
- Appraised value: $265,000, shortfall $10,000
- FHA will not finance above the appraised value. The buyer must bring $10,000 cash or renegotiate the price. There is no waiver.
What to watch in 85018
Your risk of an appraisal gap rises when inventory is very low, days on market are short, sale‑to‑list ratios run high, and a larger share of homes sell at or above list. New construction and heavy renovation activity can also increase risk if closed comps have not caught up yet. Ask your agent for current ZIP‑level stats like months of inventory, percent of sales above list, share of cash purchases, and recent price per square foot. These local signals help estimate both the likelihood and the potential size of a gap.
The bottom line
Appraisal gaps are a normal part of competitive 85018 deals. Your financing type, offer structure, and cash reserves determine how you respond if one shows up. With the right plan, you can stay competitive without overexposing yourself. If you are selling, you can pick an offer that balances strong price with high certainty of closing.
If you want a plan built for the 85018 micro‑market, reach out. Our team pairs neighborhood expertise with clear, data‑driven strategy so you know exactly how to structure your offer or choose the right one.
Ready to get started or curious how this applies to your home or purchase plan? Connect with The Bray Team for a tailored strategy and an easy next step.
FAQs
What happens if the home appraises low in 85018?
- Your lender bases the loan on the appraised value, so you either add cash to cover the shortfall, renegotiate price or terms, request a reconsideration, or cancel per your contingencies.
Who orders and pays for the appraisal in Arizona?
- The lender orders the appraisal through a third party and charges the borrower for the fee, usually collected up front during the loan process.
Can I ask for a second appraisal if I disagree with the value?
- Sometimes, but your lender must approve it, and it adds cost and time; first try a reconsideration of value with stronger comps and market support.
What are safer ways to offer appraisal gap coverage?
- Consider a clear dollar cap, pair any escalator with a coverage cap, increase earnest money only if you understand refund rules, and verify you have liquid funds.
How do appraisal waivers work with conventional loans?
- Some conventional loans qualify for waivers based on risk models, loan size, and property type; waivers are not guaranteed and are not available for FHA or VA loans.
How common are appraisal gaps in 85018 right now?
- Frequency changes with local metrics like inventory, sale‑to‑list ratios, and the share of cash vs. financed purchases; ask your agent for current ZIP‑level data.
What should a seller require from a buyer who waives the appraisal contingency?
- Request recent proof of funds that matches the promised gap coverage, clear timelines for appraisal review, and precise contract language that outlines next steps if value is low.
