Short answer
An appraisal gap occurs when the price you agreed to pay is higher than what an independent appraiser determines the home is worth. Your lender bases the loan on the lower of the purchase price or appraised value. The difference may need to be covered in cash at closing, renegotiated with the seller, or handled through an appraisal contingency if the buyer has one. In competitive Greater Seattle and Eastside submarkets, where offer prices sometimes exceed the range supported by recent comparable sales, appraisal gaps are a real risk that buyers should plan for before submitting an offer — not after the appraisal comes back.
Why appraisal gaps come up in Greater Seattle
When a listing attracts multiple offers or an offer review date triggers competition, buyers sometimes offer prices above recent comparable sales to win. The appraiser, working independently after the offer is accepted, uses closed sales — not current listing competition — to determine market value. If the contract price is higher than what comparable homes have actually sold for, the appraisal may come in below the agreed price.
This is not a defect in the appraisal process. It is what the appraisal process is designed to do: establish an independent opinion of value that the lender uses to limit its risk. The appraisal is calibrated to historical transactions, which in a rapidly shifting market can lag buyer behavior.
On the Eastside — Bellevue, Redmond, Kirkland — where price-per-square-foot varies significantly by neighborhood, school catchment boundaries, proximity to tech campuses, and commute access, appraisals can be challenging because comparable sales in some micro-locations are limited or inconsistent.
How the gap works in a financed transaction
Your lender agrees to lend a percentage of the lower of the purchase price or the appraised value. If the appraisal comes in below the contract price, the loan amount is based on the appraised value, and the difference must come from somewhere.
You agree to purchase a home at $1,050,000. The appraisal comes in at $1,000,000. Your lender will base the loan on $1,000,000. Depending on your appraisal contingency and any appraisal gap addendum, you may need to bring an additional $50,000 in cash, renegotiate with the seller, or use an available exit right.
This is money that must be available at closing, in addition to your down payment and closing costs. It is not part of your loan. It comes from your liquid assets.
What NWMLS Form 22AD does
In the Washington NWMLS transaction environment, buyers who are prepared to cover an appraisal gap can document this commitment using Form 22AD (Appraisal Gap Addendum). This form specifies the dollar amount the buyer agrees to cover above the appraised value, up to a stated cap. It gives sellers confidence that the buyer will not simply exit under an appraisal contingency if the appraisal comes in slightly short.
Including a Form 22AD commitment signals to the seller that the buyer is prepared for a gap — but it also commits the buyer under the addendum terms. Buyers should confirm with their agent and lender that the gap amount they commit to is genuinely within their liquid assets.
The tech buyer situation
Greater Seattle has a large concentration of tech employees whose compensation includes base salary, RSUs, and sometimes significant unvested future grants. Tech buyers face specific dynamics around appraisal gap planning:
Liquid vs. vested but unsold RSUs. An RSU that has vested but not been sold may be usable as an asset if the lender can verify it and it can be liquidated in time for closing. It is not the same as cash already in your bank account. An unvested RSU is not liquid and cannot be counted on for closing costs or gap coverage. Buyers planning to use vested stock for gap coverage should confirm with their lender and financial advisor how that asset will be verified and how quickly it can be liquidated without creating other complications.
Large upcoming vesting events don't help today. A buyer expecting a significant RSU tranche to vest in three months cannot use that to cover a gap that must be funded at closing today. Gap coverage requires cash or liquid assets available now.
Concentration risk. A buyer whose down payment and gap coverage both come from the same company's stock is taking on concentration risk. If the stock price declines between offer acceptance and closing, the gap coverage may shrink. Buyers with stock-heavy savings should review their liquidity situation with a financial advisor before committing to a gap amount.
Appraisal contingency: what it does and doesn't do
An appraisal contingency gives the buyer a contract-defined option if the home appraises below the agreed threshold. In many offers that threshold is the contract price, but the exact protection depends on the addendum language. It does not force the seller to reduce the price. It gives the buyer a negotiated exit or renegotiation path.
Including an appraisal contingency shifts some risk back to the seller: they cannot hold the buyer to a price the lender will not finance without the buyer covering the gap in cash. Sellers who prefer offers with limited contingencies may view an appraisal contingency as reducing deal certainty.
In competitive offer situations, buyers sometimes waive the appraisal contingency to strengthen their position — accepting the risk that if the home appraises low, they are fully committed to covering the gap in cash or losing their earnest money. This is a significant commitment that should be made with clear awareness of the cash implications.
What I check before recommending waiving the appraisal contingency
What do recent closed comparables in this submarket support as a realistic appraised value? How much above that range is the contract price, and does the buyer have liquid assets to cover that gap? Is the buyer's liquid position at closing strong enough that covering a gap of $50,000, $75,000, or $100,000 would not create hardship? Is the gap amount being committed to in writing (Form 22AD) actually available in liquid form today?
If the answers to these questions are not solid, I do not recommend waiving the appraisal contingency.
Decision framework
What does the offer price look like relative to recent comparable sales?
├── Within range → Low appraisal gap risk; contingency waiver is lower stakes
└── Above recent comparables → Gap risk is real; how much above, and can buyer cover it?
Does the buyer have liquid assets beyond down payment + closing costs?
├── Yes, substantial cushion → Covering a gap is feasible; consider Form 22AD amount
└── No, stretched for closing → Retain appraisal contingency; do not waive
Is the gap coverage amount committed to (Form 22AD) genuinely liquid?
├── Cash or vested/sellable stock → Verified and available
└── Unvested RSUs or expected future income → Not available; do not commit to this amount
Is retaining the appraisal contingency likely to cost you the offer?
├── Competitive environment, likely → Evaluate total risk vs. other offers
└── Not competitive → Retain contingency; no meaningful concession needed