What happens if the appraisal comes in below my offer in a hot market?

If the appraisal is lower than your contract price, your lender will only finance based on the appraised value, leaving an appraisal gap you must cover. Say you offered $520,000 but it appraises at $500,000 – the lender bases the loan on $500,000, and you'd need to bring the extra $20,000 in cash, renegotiate the price, or invoke an appraisal contingency to exit. In competitive markets, some buyers add an appraisal gap clause promising to cover a set shortfall, which strengthens the offer but raises your risk. Before agreeing to that, be sure you have the cash and still believe the home is worth it. Your agent can also dispute a low appraisal with comparable sales if the numbers look off.