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Florida’s summer real estate market moves fast. Homes sell quickly and often above listing price, sometimes leading to an appraisal gap.
If you’re not ready for the possibility of an appraisal gap or don't understand what it is, gain an understanding before your house hunt.
The same goes for those selling their home, as an appraisal gap can negatively affect sellers, too.
Whether you’re buying or selling, understanding how to navigate appraisal gaps—and how pre-approval with a local lender, such as MIDFLORIDA Credit Union, can help protect your deal—is key to moving forward confidently.
Get pre-approved with MIDFLORIDA.
What is an appraisal gap when buying a home?
An appraisal gap happens when a home’s appraised value is lower than the agreed purchase price, leaving buyers responsible for covering the difference.
Why does it matter in Florida’s summer real estate market?
In Florida’s fast-moving summer housing market, where bidding wars and out-of-state buyers drive prices upward, appraisal gaps are a common challenge that can disrupt your purchase or delay your sale.
What triggers an appraisal gap?
An appraisal gap emerges when a licensed appraiser values a home lower than the agreed sale price.
In Florida, market dynamics such as seasonal migration, snowbirds, weather, and heightened competition contribute to these gaps.
Appraisal gap example
- A buyer commits to purchasing a property for $415,000 (Florida median sales price for a single-family existing home).
- The appraisal comes in at $395,000.
- The buyer is responsible for bridging a $20,000 gap and the down payment.
Why appraisal gaps are common in Florida’s summer housing market
Florida’s unique summer market conditions amplify the likelihood of appraisal gaps.
Several factors contribute to this effect.
Rapid price escalation
Limited inventory and strong demand prompt quick price increases that appraisals based on closed sales from the preceding 60 to 90 days may not reflect.
Out-of-state influence
Buyers from high-cost states, often armed with cash offers, can increase sale prices.
These offers create comparables that may not align with standard appraisal practices.
Seasonal market pressures
The influx of listings during summer, coupled with snowbird departures, increases market activity.
Home improvements meant to mitigate local weather challenges, such as hurricane-resistant windows, sometimes go undocumented, influencing appraisal outcomes.
Weather-related concerns
The onset of hurricane season and persistent high temperatures affect buyer urgency and market perceptions, potentially skewing appraisal data.
These conditions create a scenario where sale prices and appraised values may not match, challenging both buyers and sellers.
How appraisal gaps affect buyers and sellers
- Buyers: An appraisal gap can disrupt the purchase process. A significant shortfall may force buyers to bring in extra cash beyond their down payment or risk their earnest money deposit if financing collapses. Competitiveness in Florida’s market sometimes pressures buyers to waive safeguards, increasing their exposure to financial risk.
- Sellers: An appraisal gap can tarnish a property’s market perception, causing it to linger or sell below the seller’s expectations. This can lead sellers to drop their asking price or return the home to the market with new terms.
Both sides must understand the local market nuances to avoid costly setbacks when appraisal gaps occur.
How to prepare for appraisal gaps as a buyer
Buyers can mitigate the impact of appraisal gaps by employing targeted strategies.
An appraisal gap clause
Specify a maximum amount, up to $15,000, for example, that you will pay over the appraised value. This clause provides flexibility without fully waiving necessary safeguards.
Budget for contingencies
Set aside an additional 2–3 percent of the purchase price to cover potential appraisal shortfalls. This extra money helps keep your budget on track if the appraisal comes in lower than expected.
Work with regional lenders
Work with local institutions, like MIDFLORIDA. Our familiarity with Florida’s market trends enables us to structure loans that account for regional variances in appraisal values.
How sellers can avoid appraisal gaps and protect their sale
Sellers can also take action to minimize the risks of appraisal gaps and facilitate a smooth transaction.
Price based on recent regional data
To set a realistic asking price, use comparables from the last 90 days and factor in any home improvements, such as energy-efficient or hurricane-resistant features.
Require pre-approval from local lenders
Insist on financing pre-approvals from lenders knowledgeable about Florida’s market conditions. This helps confirm that buyers have solid financing in place before moving forward.
Document upgrades thoroughly
Provide detailed records of renovations and upgrades. Detailed records can help support a higher appraisal by showing the value of the home's improvements.
Target credible offers
Focus on offers backed by buyers who have secured financing through local lenders. This can help reduce the chance of appraisal-related delays and create a smoother transaction.
The lender’s role in bridging the gap
Local lenders play a pivotal role in smoothing out appraisal variances.
Appraisal rebuttal process
Lenders can challenge low appraisal results by providing updated market data that accurately reflects the current conditions.
Flexible loan structuring
Adjusting loan terms can help accommodate appraisal discrepancies, ensuring buyers do not need to shoulder an undue financial burden.
Post-purchase refinancing options
Once the market evens out, buyers may be able to refinance and recover some of the extra money they paid up front to cover the appraisal gap. This can improve overall financing terms once property values adjust.
By maximizing these opportunities, lenders help buyers and sellers navigate the complexities of a fast-moving, Florida-specific market.
Major takeaways for managing appraisals in Florida’s market
Managing appraisal gaps in Florida’s summer market involves several critical considerations.
For buyers
Work with experienced local lenders who understand Florida’s unique real estate dynamics. Incorporate an appraisal gap clause and budget for contingencies.
For sellers
Price properties based on robust, recent local data, provide complete documentation of upgrades, and secure buyer pre-approvals from lenders with regional understanding.
Taking these few proactive steps can turn obstacles into opportunities for smoother, more secure deals.
Turning appraisal risks into opportunities
With its fast-paced activity and unique challenges, Florida's summer housing market requires careful navigation.
Planning for appraisal gaps in Florida’s vibrant market can help you avoid common problems and stay on track.
MIDFLORIDA’s home state-focused solutions mean your offer stands out, and your transaction proceeds smoothly despite the market’s rapid pace.
