Is the number in your appraisal the same as what buyers will actually pay in Los Gatos? In a fast-moving, high-value market, those numbers can differ, and it is not always clear why. If you are buying or selling, understanding the gap can help you protect your deal and make smarter decisions. In this guide, you will learn what each value means, how appraisals are done locally, why gaps happen, and what you can do next. Let’s dive in.
Appraisal vs. market value basics
Appraised value is a licensed appraiser’s opinion of value at a specific time for a specific purpose. Appraisers follow professional standards known as USPAP, overseen by The Appraisal Foundation. For most single-family homes, the appraiser relies on recent comparable sales, then adjusts for size, lot, condition, and location.
Market value is the most probable price a property would bring in a competitive, open market. It reflects what buyers are willing to pay based on demand, inventory, financing, and sentiment. In Los Gatos, multiple offers and cash-driven bidding can push market value above a lender-focused appraisal.
Assessed value is used for property taxes by the County Assessor. It follows assessment rules and timelines and often differs from both market and appraised values. For county assessment policies and resources, visit the Santa Clara County portal at sccgov.org.
How appraisals work here
For a purchase with financing, the lender orders the appraisal. The appraiser inspects the interior and exterior when possible, measures the home, documents condition, and takes photos. They select several recent nearby sales and explain adjustments that lead to a value opinion.
The main method for owner-occupied homes is the Sales Comparison Approach. Appraisers are trained to use this approach under recognized professional guidance from the Appraisal Institute. They may consider cost or income methods when relevant, but closed comparable sales carry the most weight.
In Los Gatos, appraisal selection is challenging because homes vary widely. Differences in age, renovation quality, lot size and slope, ADUs, and views can make one-to-one comparisons difficult. Rapid market shifts also create timing issues when current buyer demand moves faster than closed comps.
Why values diverge in Los Gatos
Multiple offers and escalation clauses can elevate the winning price beyond nearby closed sales. Cash or cash-like buyers sometimes pay premiums that appraisals tied to lending guidelines cannot fully support. Buyers may also value hard-to-quantify features like specific view corridors or commute convenience.
At times, an appraisal can exceed the contract price. This can happen when a sale closes with unusual conditions or when the appraiser documents stronger comps in a rising market. Data errors in public records or MLS can also skew the analysis if they are not corrected.
Buyer strategies for appraisal risk
Plan for the appraisal contingency. If the appraisal comes in below contract price, your options include renegotiating, covering the difference in cash, requesting a reconsideration of value, or canceling if your contingency allows. Discuss these outcomes with your agent and lender before you write the offer.
Consider an appraisal gap clause with a defined cap. This can make your offer more competitive while setting a budget guardrail. Ask your lender how any gap coverage affects your loan approval and required funds to close.
Help the appraiser with documentation. Provide a concise factsheet that includes a list of permitted upgrades, dates and costs, and the comparable sales your agent used in your analysis. Clear documentation supports a more accurate report.
Seller strategies to support value
Prepare an “appraiser package” before going on the market. Include floor plans, permit records, a list of upgrades with dates and invoices, HOA details if applicable, and any surveys or easement documents. Make interior access easy and present the home in its best condition.
Choose a pricing strategy that matches the moment. Pricing slightly below perceived market value can create demand, but it may also raise appraisal risk if bidding runs high. Your agent can pair recent closed sales with current market signals to show the appraiser why buyers are paying today’s price.
If your property features unique elements like a permitted ADU, high-end systems, or seismic upgrades, have proof ready. The stronger your documentation, the easier it is for an appraiser to justify adjustments.
When the appraisal is low
First, review the report for errors. Confirm the bedroom and bathroom counts, square footage, lot size, year built, and the accuracy of the comparables. If you find issues, submit corrections and stronger comps through your lender as a reconsideration of value.
If reconsideration does not change the outcome, you still have choices. You can renegotiate price, the buyer can add cash to cover the gap, or the parties can seek a second appraisal if the lender allows it. Loan programs have different requirements, so ask your lender about specific rules.
Some conforming loans may allow automated appraisal waivers in limited circumstances. For program details and policies, see Fannie Mae and Freddie Mac. If you are using FHA financing, appraisals include program-specific standards administered by HUD.
Permits, ADUs, and features
Permits matter when you want the value of improvements recognized. Appraisers and lenders typically require permits to treat additions, ADUs, and major remodels as contributory to value. Unpermitted spaces are often discounted.
If you are planning upgrades or need copies of past permits, consult the Town of Los Gatos Planning and Building resources. Local rules, zoning, and permit status can affect what an appraiser can support. You can learn about town processes and departments at the official site for the Town of Los Gatos, losgatosca.gov.
Document unique features that do not always show up in comps. That may include view lines, privacy, site access, and specialized systems. Photos, third-party reports, and invoices help appraisers quantify these elements.
Local factors that shape value
Micro-neighborhood differences within Los Gatos are real. Downtown and creek-adjacent areas, hillside locations, and west or east neighborhoods each show patterns that appraisers and buyers consider. Small sample sizes at the higher end can make comparable selection more subjective.
School district boundaries are important to many buyers. Proximity to schools can influence demand, although adjustments in an appraisal may be limited by available closed comps. Keep references neutral and focus on verifiable boundaries and recent sales data.
Commute patterns and tech employment trends also affect demand. Remote-work shifts, new hiring cycles, and inventory changes can move the market quickly. Environmental factors such as slope, wildfire interface zones, or flood risk can influence lender conditions and appraisal adjustments.
For market context and statewide trend reports, see the California Association of REALTORS. Your agent can translate those trends into pricing and offer strategy within your specific micro-market.
Get appraisal-smart guidance
In a high-value, low-inventory market like Los Gatos, your pricing and documentation plan can make or break a deal. Align your expectations with how appraisals are actually performed, then position your property or offer to succeed. A clear strategy will reduce surprises and give you more control at the negotiation table.
If you want a calm, appraisal-informed path to your next move, connect with The Lister Team. You will get seasoned valuation guidance, premium marketing support, and a team-based process that keeps your transaction on track. Schedule a free home valuation and consultation to start planning with confidence.
FAQs
What is the difference between appraised and market value?
- An appraisal is a professional opinion for lending or a specific purpose, while market value reflects what buyers will pay in an open market based on current demand and inventory.
How do appraisals work in Los Gatos purchases?
- The lender orders the appraisal, the appraiser inspects and selects recent comparable sales, then delivers a report with adjustments and a value opinion.
Why would my Los Gatos appraisal be lower than my offer?
- Timing, limited comparable sales, unique features, or lender constraints can lead appraisals to trail fast-moving market prices or cash-driven bidding.
What can I do if the appraisal comes in low?
- You can seek a reconsideration of value with better comps, renegotiate, add cash to cover the gap, or explore a second appraisal if the lender allows it.
Do appraisers count unpermitted additions or ADUs?
- Typically no; without permits, appraisers and lenders often discount or exclude unpermitted space from value contributions.
How is assessed value different from market value in Santa Clara County?
- Assessed value is set for property tax purposes under county and state rules and often differs from market value and lender appraisals.
Are appraisal waivers available in this market?
- Some conforming loans may offer waivers in specific cases, but in high-value Los Gatos transactions, lenders often require full appraisals.
