Did your dream home in Burlingame just appraise below the price you offered? You are not alone. In a high-cost, low-inventory market like the San Mateo Peninsula, appraisal gaps can surprise even well-prepared buyers. In this guide, you will learn what appraisal gaps are, why they happen here, what choices you have, and how to prepare so you can keep your goals on track. Let’s dive in.
What is an appraisal gap?
An appraisal gap happens when the lender-ordered appraisal comes in below your agreed purchase price. Most lenders base your mortgage on the lower of the purchase price or the appraised value. When that value is lower, the original loan-to-value plan can change and you may need extra cash to close.
Appraisals rely on comparable sales, condition, location, and market trends. Turn time is often 7 to 10 business days after ordering, but it can vary. If the number is short, you have several paths forward.
Why gaps happen in Burlingame
Burlingame is a high-price, low-inventory market close to major job centers. Multiple-offer situations are common in desirable pockets, which can push accepted prices ahead of recent closed sales. Appraisals often lag these quick shifts.
Unique upgrades, high-end finishes, or premium locations may not have perfect comparable sales. Appraisers rely on closed data from prior weeks and months, not the latest bidding activity. Even a small percentage gap can equal tens or hundreds of thousands of dollars here, which magnifies the impact on your budget.
How a low appraisal hits your numbers
When the appraised value is lower than the contract price, the lender will size the loan off the lower value. That can increase your required cash to close or force a change in loan terms.
Example (hypothetical):
- Purchase price: 2,000,000
- Appraisal: 1,850,000
- Gap: 150,000
- Planned loan at 80% LTV on purchase: 1,600,000, with 400,000 down
- To keep the same loan amount, you add 150,000 to your down payment for a total of 550,000. Or you accept a smaller loan sized to the appraised value and adjust your financing plan.
Your options when the appraisal is low
Cover the gap in cash
- How it works: You pay the difference between the appraised value and the purchase price so your loan can stay on track.
- Pros: Keeps the deal moving and avoids re-negotiation.
- Cons: Requires significant liquid funds and may affect reserves.
- Timing: Fast if funds are verified.
Renegotiate the price
- How it works: You ask the seller to reduce the price to the appraised value.
- Pros: Preserves cash and original loan plan.
- Cons: Seller may refuse or counter to split the difference; it can delay closing.
- Timing: Often takes several days and an amendment.
Split the difference
- How it works: You and the seller share the gap.
- Pros: Practical middle ground when both parties want to close.
- Cons: Still increases your out-of-pocket cost; needs seller agreement.
Request a reconsideration of value
- How it works: Your lender submits new comps and data to the appraiser to review the value.
- Pros: Can raise the value without extra cash if strong comps exist.
- Cons: Not guaranteed and can add time; lender policies vary.
- Timing: Often 5 to 14 extra days; a second appraisal is possible but not assured.
Cancel under an appraisal contingency
- How it works: If your offer included this contingency and talks stall, you can cancel and recover your earnest money per the contract.
- Pros: You avoid overpaying and keep your deposit if you follow the terms.
- Cons: You lose the home and may face competition on the next one.
Adjust financing structure
- How it works: Explore a seller carryback second, bridge funds, or private financing for the shortfall.
- Pros: Alternative path when cash is tight.
- Cons: More complex and must fit lender rules; often rare.
Use an appraisal gap guarantee
- How it works: Before you write the offer, you waive the appraisal contingency or agree to cover a set dollar amount if the appraisal is low.
- Pros: Strengthens your offer in multiple-offer situations.
- Cons: Raises your financial risk; only wise if you can afford the gap.
Timelines and contingency windows
- Appraisal order and turn time: Often 7 to 10 business days after order, depending on volume.
- Appraisal contingency: Commonly 7 to 17 days, negotiable. Your rights and deadlines come from this clause.
- Reconsideration or second appraisal: Can add 5 to 14 days.
- Loan programs: Conventional loans size to the lower of price or appraised value. FHA and VA appraisals include property standards that may require repairs before closing.
Prepare before you write an offer
- Set a buffer: In Burlingame’s price range, even a 3 to 5 percent shortfall can be a large dollar amount. Decide in advance how much gap you can cover.
- Align with your lender: Discuss appraisal strategies, reserve requirements, and how added cash could affect underwriting.
- Clarify contingencies: If you include an appraisal gap guarantee, set a clear dollar limit and closing terms.
- Build the comp story: Strong nearby sales and documented upgrades help if you need a reconsideration later.
- Plan for tradeoffs: Covering a gap may reduce your emergency reserves. Weigh the long-term fit of the home against the cash hit.
Burlingame examples
Example 1 — remodeled bungalow, bidding war:
- Buyer pays 100,000 over recent comps to win. Appraisal comes in 60,000 low. The buyer adds 60,000 to the down payment to keep the planned loan and closes on time.
Example 2 — mid-market home with a gap guarantee:
- Offer includes a 50,000 appraisal-gap guarantee. Appraisal is 30,000 low. The buyer covers 30,000 at closing, the seller keeps price, and escrow stays on schedule.
Quick checklist if your appraisal is low
- Verify the report for errors, missing data, or overlooked comps.
- Call your lender to confirm loan effects and timing.
- Decide how much cash you can bring without harming reserves.
- Prepare a focused packet of nearby, truly comparable closed sales.
- Present a clear proposal to the seller: reduce price, split the gap, or both.
- Extend contingency or close dates in writing if needed.
- If you will cancel, follow the contract notice rules.
The bottom line for Burlingame buyers
Appraisal gaps are part of buying in a fast-moving, high-price market. With a plan for cash, tight timelines, and the right negotiation strategy, you can protect your goals and keep your escrow on track. If you want a local guide who can help you weigh the numbers, prepare strong comps, and coordinate with lenders and escrow, connect with Julie Flouty for a focused, calm path to closing.
FAQs
What does an appraisal gap mean in a Burlingame purchase?
- It means the appraised value is below your contract price, so your lender sizes the loan to the lower value and you may need extra cash, a price change, or different financing.
How much extra cash should I budget for a possible gap?
- In a high-cost area, even 3 to 5 percent can be a large amount, so decide in advance what you can cover without straining reserves and align this with your lender.
Can I challenge a low appraisal in San Mateo County?
- Yes, your lender can request a reconsideration of value using better comps and documentation, though results vary and the process may add 5 to 14 days.
What if I waived the appraisal contingency in my offer?
- You are generally agreeing to move forward even if the appraisal is low, up to your stated limit if you used a gap guarantee, so be sure you can cover that cash.
How long do appraisals and reconsiderations take locally?
- Appraisals often take 7 to 10 business days after ordering, and reconsiderations or second appraisals can add about 5 to 14 days to escrow.
Do FHA or VA appraisals work differently in Burlingame?
- FHA and VA appraisals include minimum property standards and may require repairs, and lenders still base the loan on the lower of price or appraised value.
