When the Numbers Don't Match the Price

by Stevan Stanisic

If you own a property in Southwest Florida, you have probably heard the word appraisal come up in a transaction. Most people nod along and assume it is just a formality. It is not. And in a market where prices have moved as much as ours has over the past few years, understanding how an appraisal works can be the difference between a deal that closes and one that falls apart at the worst possible moment.

Here is what is actually happening when an appraiser walks through a home.

An appraisal is an independent opinion of value ordered by the lender, not the buyer and not the seller. The appraiser's job is to determine whether the property is worth at least the amount being borrowed. They do this by reviewing the condition of the home, its size, location, and features, and then comparing it against recent sales of similar properties in the area. Those comparable sales, called comps, are the backbone of the report.

The appraiser is not trying to justify the contract price. They are working independently, and their conclusion may be higher than the contract price, right at it, or below it.

That last scenario is where things get interesting.

When a property does not appraise at the contract price, the buyer's lender will only finance based on the appraised value. If a home is under contract at $650,000 and the appraisal comes in at $620,000, the lender will base the loan on $620,000. That $30,000 gap has to be resolved before the transaction can move forward.

There are a few ways that typically happens. The buyer can make up the difference in cash. The seller can agree to reduce the price to the appraised value. The two parties can meet somewhere in the middle. Or, if the contract includes an appraisal contingency, the buyer can walk away without losing their deposit.

What most buyers do not realize is that the appraisal contingency is one of the most important protections in a purchase contract. Waiving it, which some buyers do in competitive situations, means agreeing to cover any gap out of pocket regardless of what the appraisal says. That is a significant commitment, and it should never be made without a clear understanding of the financial exposure involved.

For sellers, a low appraisal is not always the end of the road. If you believe the appraiser missed relevant comps or did not account for recent improvements, your agent can submit a reconsideration of value with supporting data. It does not always change the outcome, but it is a legitimate step worth taking before renegotiating the price.

One thing worth noting for Southwest Florida specifically: our market has pockets where values have shifted quickly, and appraisers working from data that is even a few months old can sometimes lag behind what the market is actually doing. A well-prepared listing with clean documentation of upgrades, recent sales, and community context can make a meaningful difference in how the report comes together.

If you have questions about how appraisals factor into a purchase or sale in this market, I am always glad to walk through it with you.