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A financing gap in the real estate industry refers to the difference between the asking price of a property and the amount of find available from a prospective buyer.
Bridging the gap would be what the buyer would be doing in order to bring a deal towards closing.
Take note that most of the time, the selling price would end up lower than a seller’s asking price. This means that the financing gap which a buyer is trying to cover tends to be smaller than first thought.
As financing gap is a term that is used across various investment markets, it should be explicitly mentioned that what industry one is referring to when talking to investors.
Some common ways to bridge that are:
- Personal loans
- Seller financing
- Borrowing from family
When the gap is too big, potential buyers often walk away unless the seller lowers his expectation closer to an action price.