The Appraisal Gap Reality in Arkansas — What Buyers and Sellers Need to Know

By Christy Robinson, Executive Broker | REALTOR®, MRP

Keller Williams Realty

Central Arkansas Market Strategist

Introduction

For many buyers and sellers, the appraisal is the most nerve-wracking part of a real estate transaction.

And despite what many people believe, appraisal gaps are not just a big-city or coastal-market issue. They happen in Arkansas — especially in strong school districts, fast-growing suburbs, and new construction-heavy areas.

When an appraisal comes in lower than the agreed purchase price, deals don’t fail because of the appraisal itself. They fail because expectations were never aligned in the first place.

Understanding how appraisals work — and why gaps happen — is one of the most important ways to protect a deal in today’s Arkansas market.

What Is an Appraisal Gap?

An appraisal gap occurs when the appraised value is lower than the contract price.

Example:

• Contract price: $325,000

• Appraised value: $310,000

• Appraisal gap: $15,000

Unless the contract includes protections, that difference must be:

• Renegotiated

• Paid in cash by the buyer

• Split between buyer and seller

• Or the deal may fall apart

In Arkansas, appraisal gaps are most common in desirable, fast-moving areas — not weak markets.

Why Appraisals Come in Low (Even When the Price Feels “Right”)

Appraisers are not trying to kill deals. They are required to support value using closed, verifiable data — not emotion, demand, or competition.

Here are the most common reasons Arkansas appraisals fall short.

1. Rapid Appreciation Outpaces Closed Sales

This is the #1 cause of appraisal gaps.

In growing Arkansas markets, prices can rise faster than the data appraisers are allowed to use.

Appraisers rely on:

• Closed sales (not pending or active listings)

• Historical data

• Recent transactions

When prices are rising quickly, the most relevant comparable sales may lag behind current market reality.

This is especially common in:

• Bryant

• Cabot

• Conway

• Maumelle

• Greenbrier

• Benton

Strong demand doesn’t always immediately show up in closed comps.

2. New Construction Sets Prices Faster Than Resales

New construction plays a major role in appraisal gaps across Central Arkansas.

Builders:

• Release new phases at higher prices

• Add upgrades that increase contract prices

• Offer incentives that aren’t reflected in resale comps

Resale homes nearby may not yet reflect these increases in closed sales, even though buyers are willing to pay them.

This creates a timing gap between market value and appraised value.

3. Limited Comparable Properties

In many Arkansas neighborhoods, especially newer or custom-build areas, there simply aren’t enough truly comparable homes.

This happens when:

• Floorplans vary widely

• Lot sizes differ significantly

• Homes are custom or semi-custom

• Neighborhoods are still developing

  
  

When appraisers are forced to stretch to less-similar comps, valuations can skew conservative.

4. Over-Customization Without Resale Support

Not all upgrades add equal value in an appraisal.

Features that often don’t appraise dollar-for-dollar:

• Highly personalized design choices

• Luxury finishes that exceed neighborhood norms

• Specialty rooms or niche features

• Over-improving relative to nearby homes

Buyers may love these features — but appraisers must compare them to what has actually sold, not what feels unique.

Market Value vs. Appraised Value (This Is Critical)

One of the biggest misunderstandings in real estate is assuming market value and appraised value are the same thing.

They are not.

• Market value is what a willing buyer will pay and a seller will accept under current conditions.

• Appraised value is an opinion of value supported by closed data under lending guidelines.

In strong Arkansas markets, buyers often create market value before appraisals can catch up.

That doesn’t mean the price is wrong — it means the data is lagging.

How Buyers Can Protect Themselves From Appraisal Gaps

Buyers don’t need to fear appraisals — but they do need strategy.

1. Understand the Difference Between Price and Value

A competitive price doesn’t always equal appraised value. Ask your Realtor® to explain where risk exists before you offer.

2. Avoid Overpaying Without a Plan

If offering above asking price, buyers should know:

• How much appraisal gap they can comfortably handle

• Whether they are willing to renegotiate

• When walking away makes sense

Strong offers are strategic — not emotional.

3. Use Contract Protections Wisely

Well-written contracts can:

• Limit appraisal exposure

• Preserve negotiation leverage

• Keep buyers protected

This is where experienced representation matters.

4. Know When to Walk

Not every home is worth bridging an appraisal gap. Buyers should evaluate long-term value — not just winning the offer.

How Sellers Can Avoid Appraisal Problems

Sellers play a critical role in preventing appraisal issues.

1. Price Based on Closed Sales — Not Just Listings

Active listings reflect hope. Closed sales reflect proof. Pricing must be supported by data.

2. Prepare Documentation for Upgrades

Appraisers need clear, organized information:

• Upgrade lists

• Dates and costs

• Permits when applicable

Well-documented improvements strengthen valuations.

3. Position Against New Construction Correctly

If new construction nearby is driving pricing:

• Adjust expectations realistically

• Understand incentive impacts

• Avoid pricing purely off builder marketing

4. Be Open to Appraisal-Based Negotiation

Flexibility often saves deals — rigidity kills them.

Why Appraisal Gaps Are More Common in “Good” Markets

Ironically, appraisal gaps often occur in the healthiest markets.

Why?

• High buyer demand

• Limited inventory

• Strong school districts

• New construction growth

• Fast sales velocity

Weak markets rarely have appraisal gaps — because prices aren’t being pushed upward by competition.

What Happens When Appraisals Are Handled Correctly

When buyers and sellers understand the appraisal process:

• Deals stay intact

• Negotiations stay calm

• Expectations stay realistic

• Transactions move forward smoothly

The appraisal becomes a checkpoint — not a crisis.

A Common Mistake Buyers and Sellers Make

The most common mistake is assuming:

“If the appraisal is low, the deal is dead.”

In reality, most appraisal gaps are negotiable, manageable, and solvable — when expectations are aligned early.

Final Thought

Appraisals don’t kill deals.

Low values don’t kill deals.

Misaligned expectations kill deals.

In Arkansas, appraisal gaps are a sign of strong demand — not market failure. Buyers and sellers who understand this reality are far more likely to close successfully and confidently.