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Real Estate Appraisal Gap Addendum

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REAL ESTATE APPRAISAL GAP ADDENDUM

Parties and Property Identification

Buyer Name:

Seller Name:

Agreement Recitals

This Appraisal Gap Addendum is incorporated into and amends the Purchase Agreement dated between Buyer and Seller for the Property described above. Capitalized terms used herein have the meanings given in the Purchase Agreement unless otherwise defined in this Addendum.

Financial Terms and Appraisal Gap

Purchase Price: $    Earnest Money: $

Lender Name:    Anticipated Loan Amount: $

Appraisal Gap Maximum Contribution: Buyer agrees that in the event that the appraised value of the Property is less than the Purchase Price, Buyer will contribute additional cash at closing up to $ toward the difference between the Purchase Price and the appraised value (the "Appraisal Gap"), subject to the conditions set forth below.

Buyer Election (select all that apply by checking the applicable boxes):

Buyer agrees to increase Buyer's cash to cover Appraisal Gap up to the maximum contribution stated above and proceed to closing without further adjustment to Purchase Price.

Buyer will attempt to renegotiate the Purchase Price with Seller upon receipt of an appraisal showing value below Purchase Price. If Seller and Buyer cannot agree to an amended Purchase Price within days after Buyer’s written notice, then Buyer may terminate the Purchase Agreement as provided below.

Buyer may elect to terminate the Purchase Agreement if the appraisal is less than the Purchase Price by more than the Appraisal Gap Maximum Contribution stated above. To terminate, Buyer must provide written notice to Seller within the appraisal notice period set forth below.

Timing and Notice

Appraisal Receipt Deadline: Buyer shall obtain and deliver the appraisal report to Seller no later than . If Buyer fails to deliver the appraisal by that date, Buyer shall be deemed to have waived the appraisal contingency, unless Seller agrees otherwise in writing.

Appraisal Notice Period: Upon receipt of an appraisal showing value below the Purchase Price, Buyer shall notify Seller in writing of Buyer's election pursuant to the options selected above within days from the date Buyer receives the appraisal report. Failure to timely notify Seller shall constitute Buyer's election to terminate the Purchase Agreement and the Earnest Money shall be handled according to the Purchase Agreement.

Effect on Financing Contingency and Closing

If Buyer elects to contribute additional funds as described above, Buyer shall deliver such additional funds at closing. Buyer agrees that Lender-required values may require additional cash or financing adjustments; Buyer remains responsible for securing loan approval and any necessary additional funds to consummate the transaction if Buyer selected the option to increase cash.

If Buyer does not elect to contribute additional funds and Buyer does not waive the appraisal contingency, Seller may elect to (a) accept a reduced Purchase Price in writing, (b) proceed to closing if Buyer and Seller otherwise agree, or (c) treat the Purchase Agreement as terminated in accordance with its terms.

Default, Remedies and Indemnity

Default by Buyer or Seller under this Addendum shall be governed by the Default and Remedies provisions of the Purchase Agreement, except that any dispute specific to the Appraisal Gap obligations shall be subject to the dispute resolution procedures set forth in the Purchase Agreement. Buyer shall indemnify and hold Seller harmless from any claims, costs, or losses arising from Buyer's failure to perform Buyer's obligations under this Addendum.

Additional Provisions

Governing Law: This Addendum shall be governed by and construed in accordance with the laws of the state in which the Property is located. This Addendum, together with the Purchase Agreement, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings relating thereto. Any amendment to this Addendum must be in writing and signed by both parties.

Acknowledgment and Certification

Buyer and Seller acknowledge that they have read and understand this Appraisal Gap Addendum, that they have had the opportunity to seek independent legal advice, and that their signatures below constitute binding acceptance of the terms set forth herein.

Addendum Effective Date:

Buyer:

By:

Date:

Seller:

By:

Date:

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What the Real Estate Appraisal Gap Addendum Is

The Real Estate Appraisal Gap Addendum is a short contractual addendum used in purchase transactions to allocate responsibility when a lender's appraisal is lower than the agreed purchase price. It records whether and how the buyer, seller, or another party will cover the difference between the contract price and the appraised value, and it sets limits, deadlines, and conditions for payment. Typical provisions include the maximum gap amount, timing for funds, contingency removal, and whether the seller may seek alternate financing or re-negotiate the price. Parties use it to clarify risk and avoid disputes when lender valuations diverge.

Why Use an Appraisal Gap Addendum

Use an Appraisal Gap Addendum to reduce ambiguity about who will make up an appraisal shortfall, speed lender approval, and preserve the transaction when the buyer is willing to bridge the gap. It documents limits, payment timing, and contingency removal so parties and lenders have a clear roadmap.

Why Use an Appraisal Gap Addendum

Who Typically Uses This Addendum

Typical users include buyers, sellers, listing agents, buyer's agents, lenders, and title companies involved in residential and commercial purchase contracts.

  • Buyers seeking to keep offers competitive by agreeing to limited appraisal shortfalls
  • Sellers wanting clarity on acceptable shortfalls and deadlines for additional funds
  • Real estate agents and title companies managing closing conditions and disbursement timing

Even when not mandatory, adding this addendum reduces renegotiation at appraisal contingency removal and documents financial commitments in writing.

Core Elements to Include in a Professional Addendum

Core components define the parties, maximum gap amount, funding source, deadlines, contingency removal conditions, and remedies to reduce disputes after appraisal.

Parties

Identify buyer, seller, lender, and any guarantor by full legal name and capacity. Include contact details and escrow routing instructions to ensure timely, unambiguous fund delivery if needed.

Maximum Gap

State a specific dollar cap or formula (for example, X% of purchase price). Clarify whether the cap is per-party or aggregate, and whether it survives renegotiation.

Funding Source

Specify whether the buyer will contribute cash, obtain bridge financing, or the seller will reduce price; include timeline for deposit and evidence required such as bank statements or loan commitments.

Deadlines

Set concrete dates or day counts for appraisal receipt, notice of shortfall, delivery of funds, and removal of appraisal contingency; define business days and calculation method.

Contingency Terms

State whether the buyer may waive appraisal contingency, permit renegotiation, or terminate if the gap exceeds the cap; include requirements for written acceptance or amendment.

Remedies

Describe consequences of nonpayment or failure to fund: contract termination, forfeiture of deposit, extension for cure, or specific damages; tie remedies to the governing law clause.

Step-by-Step: How to Complete and Execute the Addendum

Follow these steps to complete and execute the Real Estate Appraisal Gap Addendum accurately and on time.

  • 01
    Review Appraisal: Compare the lender appraisal to the contract price; calculate the precise shortfall.
  • 02
    Agree Terms: Negotiate gap amount, funding source, and firm deadlines with all parties.
  • 03
    Document Addendum: Prepare the signed addendum with exact dollar figures and required signatures.
  • 04
    Deliver & Track: Send to lender, escrow, and each party; confirm receipt and monitor funding.

Online Workflow Settings to Configure

Common online settings to configure when sending an Appraisal Gap Addendum for e-signature and routing.

Field Configuration
Authentication Method Email link | SMS code | KBA
Signer Order Sequential or parallel signer order
Escrow Recipient Add escrow officer as CC recipient
Document Retention Enable signed PDF with audit certificate

Platform Considerations for eSigning and Delivery

Select a platform that provides secure audit trails, conditional fields, and configurable signer authentication for compliance.

  • PDF Support: PDF and Word DOCX supported
  • Authentication Options: Email, SMS, or KBA available
  • Integrations: Integrates with CRM and cloud storage

Where to Send and How It Flows in a Transaction

Typical routing steps for filing and delivering the Appraisal Gap Addendum online during a transaction.

  • Prepare Addendum: Draft with exact amounts and parties listed.
  • Send to Lender: Provide to lender for underwriting and acceptance.
  • Deliver to Escrow: Escrow receives funds instructions and signed addendum.
  • Archive Signed Copy: Store executed addendum with closing documents.

Typical Deadlines and Timing to Observe

Key dates and deadlines typically used in Appraisal Gap Addenda; adjust these to match contract and lender requirements.

Appraisal Delivery Deadline:

Date by which appraisal must be delivered to buyer and lender.

Notice of Shortfall:

Days after appraisal within which a shortfall notice must be given.

Buyer Cure Period:

Number of days the buyer has to provide funds or financing.

Contingency Removal Date:

Date when appraisal contingency is removed if gap is addressed.

Closing Date Impact:

How the timing for funding affects the scheduled closing date.

Notarization and Witness Steps When Executing the Addendum

Authentication steps and witness/notary practices applicable when executing the addendum, including options for RON or in-person notarization depending on state.

01

Signer Identification

Confirm identity with government ID or electronic identity proofing before signing.

02

Notary Acknowledgement

If required, obtain notary acknowledgment in person or via RON per state rules.

03

Witnesses Required

Check state rules; some states require witnesses for certain deeds or POAs, less often for addenda.

04

RON Session

If using RON, follow identity-proofing and recording requirements for that state.

05

Audio-Visual Recording

RON often requires audio-video recording retained per state retention rules.

06

Notary Journal Entry

Notaries should record signing details and retain journal per state law.

07

Certificate Attachment

Attach notarial certificate or RON evidence to the executed addendum.

08

Escrow Delivery

Provide notarized or signed copies promptly to escrow and lender as required.

Common Preparation Errors to Avoid

  • Failing to specify whether the gap is per-party or total, which can cause disputes over shared obligations and double-counting.
  • Using vague funding language, such as 'reasonable funds,' which delays underwriting and escrow disbursement until specifics are clarified.
  • Missing or inconsistent deadlines and date formats, which can void contingency timing and create rights to terminate the contract.
  • Not delivering the signed addendum to lender and escrow promptly, which can prevent loan approval or delay closing.

Risks and Consequences of an Incorrect Addendum

Contract Termination: Party may terminate if gap unmet
Deposit Forfeiture: Buyer may lose earnest money
Delay Costs: Closing delays increase costs
Loan Denial: Lender may deny financing
Legal Disputes: Litigation over obligations
Title Issues: Recording delays or defects

Practical Examples of Addendum Use

Representative scenarios illustrating how a Real Estate Appraisal Gap Addendum resolves appraisal shortfalls and preserves closings in different deal contexts.

Residential Purchase

A buyer offers $420,000 but the appraisal returns $400,000, creating a $20,000 shortfall.

  • Buyer agrees to cover $10,000 and seller reduces price by $5,000.
  • The addendum capped buyer contribution at $10,000, required funds within three business days, and preserved the closing date without lender re-qualification; escrow received signed addendum and funds on schedule.

Investor Closing

An investor contract requires a rapid close; lender appraisal is 15% below contract on a multifamily property.

  • Seller agrees to a modest price reduction and buyer funds the remainder.
  • Using a gap addendum with a formula cap and short cure period, parties avoided termination, escrow held excess funds subject to post-closing adjustment, and underwriting proceeded without loan denial.

Who Typically Signs and Why

Buyer — Purchaser

The buyer or the buyer's authorized signatory commits to the funding terms and cure periods. The buyer's signature confirms intent to be bound, triggers lender review, and can remove the appraisal contingency when obligations are satisfied.

Escrow Officer — Title Agent

Escrow or title company staff acknowledge receipt and disbursement instructions. Their acknowledgement ensures funds are routed per the addendum and provides a chain of custody for closing and title insurance purposes.

Required Information to Include in the Addendum

Property Address: Street, city, state, ZIP
Purchase Price: Numerical amount, e.g., $350,000
Appraised Value: Lender appraisal amount in dollars
Maximum Gap: Dollar cap or percentage formula
Funding Source: Cash, loan, seller credit, or escrow holdback
Effective Date: MM/DD/YYYY format

eSignature Pricing and Feature Comparison

A concise vendor comparison for common eSignature plan criteria; signNow is listed first per platform pricing and feature considerations.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies Varies Varies Varies
Bulk Send Yes (tiered) Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No
Envelope Cap No cap 100 envelopes/user/year Varies by plan Varies by plan Varies by plan

Frequently Asked Questions About Appraisal Gap Addenda

Answers to common questions about preparing, executing, and enforcing the Real Estate Appraisal Gap Addendum in U.S. real estate transactions.


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