The Appraisal Process and Options

When buying or selling a home in Florida, one of the most important steps is the appraisal. An appraisal is an unbiased estimate of a property’s value based on its condition, location, and comparable sales in the area. The appraisal can have a significant impact on the sale price of a home, and understanding what happens when an appraisal comes in either higher or lower than the sale price is crucial for both buyers and sellers.

If the appraisal comes in higher than the sale price, it’s generally good news for the seller and the buyer. This means that the buyer’s lender believes the property is worth more than the agreed-upon sale price, which can help to justify the buyer’s loan amount.  This can allow the buyer to raise the sale price and roll some of their closing costs into their financing as well.  In some cases, the seller may choose to increase the sale price to match the appraised value. Alternatively, the seller may choose to stick with the original sale price and potentially attract multiple offers from other buyers who are willing to pay more than the appraised value.

On the other hand, if the appraisal comes in lower than the sale price, it can create some challenges for both the buyer and the seller. For the buyer, a low appraisal means that the lender is not willing to loan them the full amount they need to purchase the property. This can result in the buyer needing to come up with more cash upfront to cover the difference, renegotiating the sale price with the seller, or potentially even walking away from the deal.

For the seller, a low appraisal can be disappointing, especially if they were expecting to receive a certain amount of money from the sale. However, it’s important to remember that an appraisal is simply an estimate of the property’s value, and there may be factors that the appraiser did not consider. In some cases, the seller may choose to lower the sale price to match the appraised value in order to avoid losing the sale altogether.

One strategy to head off potential appraisal issues for the buyer and to make their offer stand out is to include appraisal gap coverage.  With appraisal gap coverage the buyer earmarks a certain amount of funds to be used to cover the appraisal gap if it occurs.  This clause ensures that the seller will net the same amount of money despite the appraisal outcome.

It’s worth noting that if an appraisal comes in lower than the sale price, the buyer has the option to request a second appraisal. This can be a good strategy if the buyer believes that the first appraisal was inaccurate or incomplete. However, it’s important to keep in mind that a second appraisal may not always result in a higher value, and it can add additional time and costs to the closing process.

In conclusion, the appraisal is an essential step in the home buying and selling process in Florida. While a high appraisal can be good news for the seller, a low appraisal can create some challenges for both parties. It’s important to work closely with your real estate agent and lender to understand your options and make informed decisions based on the appraisal results.