Buying Advice

What Buyers and Sellers Need to Know About Appraisal Gaps: Big Island Real Estate

Sellers: You’ve got a great offer after a bidding war that’s more than you asked, so now you’re under contract!

Buyers: You found a Big Island condo you love, and after a nerve-wracking bidding war, your offer has been accepted!

Both the buyers and sellers are feeling pretty good right now. But then the appraisal returns, and it’s not quite what anyone expected. The bidding war may have driven up the home’s current market value, but the appraisal for the loan reflects that the value is objectively not quite where everyone thought it would be. What happens now? How can Big Island buyers and sellers walk away happy with this real estate deal?

table and chairs with pillows under covered lanai

What Happens When You Get a Low Appraisal?

There are a few ways to handle a low real estate appraisal on a Hawaii home: the seller comes down to the appraisal amount, the difference is split between buyer and seller, or the deal is canceled entirely.

Buyer Comes Up With the Difference

After a bidding war on a Big Island condo or home, it is disappointing to receive a low appraisal, but how low is “low”? If it’s just a few thousand dollars, buyers should consider paying the difference in cash if possible. An appraisal that comes in drastically lower should be cause for reconsideration, though.

Seller Comes Down

If the buyer cannot get financing for the loan amount initially agreed upon, one option is for the seller to come down in price. If there is only a small difference between the appraisal amount and the accepted offer amount, it is probably worth taking a small hit for the deal’s sake.

Negotiate or Cancel

The bottom line is that the deal will have to be renegotiated or canceled. Most of the time, parties on both sides of the deal want it to work out, so negotiating generally is preferable, but sometimes there is no easy path to a meeting of the minds, so there is no option but to cancel the contract.

Sellers should carefully consider if cancelation is a better option at all – were there backup offers in place? What if those prospective buyers have already moved on? And what if any future appraisals also come back low? Is there room in the seller’s timeline for all of this?

lounge chairs on outdoor patio area

What is a High Appraisal?

When an appraisal comes back over the purchase price, that means the home is potentially worth more than the buyer is paying for it. There is no change to their mortgage or payment, but the home is worth more than anticipated. Investors like to see a high appraisal, too, as it ultimately helps leverage their capital.

What is an Appraisal Waiver in a Hawaii Real Estate Sale Contract?

Many purchase contracts in today’s seller’s market show a buyer waives the appraisal gap. It’s important to know what that means for both buyers and sellers.


When a buyer waives the appraisal in a purchase contract, no matter what the home is appraised for, they will come up with the cash difference. The buyer is giving away their right to cancel if there is a lower appraisal.


With the market changing, an appraisal waiver can greatly assist a seller. This will ensure they don’t have to negotiate with the buyer if there is a low appraisal value. The seller also knows the buyer can not cancel if the home is not appraised for the purchase price.

outdoor dining area in front on grassy backyard

Big Island Real Estate Expert

Working with a real estate agent who knows the Big Island communities will help you feel confident in your real estate decision. I would be honored to help you find your piece of paradise.

For more information about Hawaii Island real estate, please reach out.

With warmest aloha,

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July 28, 2022

I already get mail directly from you Leeana…. I just wanted to say Mahalo for this article …… it’s helpful to my future plan’s…….. Aloha Scott

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