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I'm trying to install any new pop-up assembly because my sink is currently leaking from the gasket. I purchased a Ace Hardware brand replacement. Unfortunately, I did not read the directions before I left the hardware store.

Now, I am at home and I see that the instructions say to "apply plumbers putty to the rim of the hole"-- to seal the flange into place.

So is it possible to use Teflon tape instead of plumbers putty for this?

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In a word, no. The plumber's putty is what forms the gasket between the drain insert and the bottom of the sink, and is likely what failed in the old one. Telfon tape doesn't work very well as a seal unless it is forced into an extremely tight space (i.e. on threads) and is really only made of Teflon to reduce friction enough to allow it to stay in place long enough to get the load on it tight enough.

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