Have you heard horror stories about low appraisals blowing up a deal at the last minute? If you are buying in Fort Lauderdale, you may see prices moving quickly and wonder how a bank will view your offer. You are not alone. In this guide, you will learn what an appraisal gap is, how it affects your loan and cash, and practical steps to protect your budget in Broward County. Let’s dive in.
Appraisal gap, defined
An appraisal gap happens when the home’s contract price is higher than the appraised value set by a licensed appraiser. Lenders base loan amounts on the appraised value, not the price you offered. That difference can create a shortfall you must address before closing.
Here is a simple example:
- Contract price: $700,000
- Appraised value: $650,000
- Appraisal gap: $50,000
How it hits your loan and cash
Because your lender uses the appraised value, a low appraisal can reduce the loan amount and increase the cash you must bring to closing. Consider this common scenario for a conventional loan at 80% loan-to-value.
- Your plan: 20% down on $700,000 is $140,000, with a $560,000 loan.
- Appraised value is $650,000, so the lender caps the loan at 80% of $650,000, which is $520,000.
- New total cash to close for the same price is $700,000 minus $520,000, or $180,000.
- You planned to bring $140,000, so you would need an extra $40,000.
Contingencies and loan programs
An appraisal contingency lets you renegotiate or cancel if the value comes in low. If you waive this contingency to compete, you are taking on the risk of covering any shortfall with cash. Even if you waive it, most lenders still require an appraisal for underwriting.
Different loan programs have different rules. Conventional loans set the loan by a percentage of the appraised value. FHA and VA loans have their own appraisal processes and minimum property standards guided by the program; you can learn more about FHA standards through the U.S. Department of Housing and Urban Development.
Fort Lauderdale factors to watch
South Florida moves fast at times, which can cause contract prices to outpace the closed sales used in appraisals. That is when appraisal gaps tend to appear more often. Local supply, seasonal demand, and investor activity can all play a role in Broward County.
Condos are common in Fort Lauderdale and can be more complex to appraise. HOA financials, reserve levels, insurance costs, and building maintenance records can influence value for units in a specific building. In busier seasons, appraisal turn times may also stretch, so build realistic timelines into your offer.
Plan ahead before you offer
Preparation reduces surprises. Before you write, consider these steps:
- Get a strong preapproval, ideally pre-underwritten, so your lender and file are ready.
- Work with your agent to identify recent closed sales that best match your target home.
- Gather documentation for permitted upgrades, big-ticket renovations, and special features. Permits and completion status matter to appraisers.
- For condos, pull HOA financials, reserve studies, insurance summaries, and recent meeting minutes to share through your lender if requested.
Make a winning offer without overexposure
You can compete while still managing risk. Options include:
- Use an appraisal gap guarantee clause with a cap, such as “buyer will cover up to $X of any shortfall,” if your cash reserves allow it.
- Consider an escalation clause or higher earnest money to strengthen your offer without fully waiving protections.
- Keep an appraisal contingency if you want the option to renegotiate or walk away based on value.
Discuss specific terms with your lender, title company, and attorney as needed to align with your comfort level.
If the appraisal comes in low
You have several paths. Start with facts and documents, not emotion.
- Request a Reconsideration of Value through your lender. Share better comps, correct errors, and submit permits or invoices. Guidance for lenders and appraisals is outlined by Fannie Mae.
- Ask the seller to reduce the price or split the difference.
- Bring additional cash to closing if it fits your plan.
- Your lender may pursue a desk review or, in some cases, order a second appraisal.
- If you kept an appraisal contingency and cannot bridge the gap, you may cancel under the terms of your contract.
How appraisals work and stay independent
Your lender orders the appraisal, and the appraiser must be impartial. Appraisers follow uniform standards designed to promote independence and accuracy. For background on ethics and standards, visit The Appraisal Foundation.
In Florida, appraisers are licensed and regulated by the state. You can verify licensing and review rules through the Florida Department of Business & Professional Regulation.
Local tools and records
Use local records and professional market data to strengthen your file.
- For ownership history, legal description, and assessed values, see the Broward County Property Appraiser. Assessed values are not the same as market appraisals.
- For statewide market reports and guidance, check Florida Realtors.
- Your agent and lender can reference MLS market trend tools, such as Stellar MLS, for recent closed sales.
The bottom line
Appraisal gaps are manageable when you prepare, write smart offers, and respond with data if a value comes in low. With a clear plan, you can protect your budget and still compete in Fort Lauderdale’s fast-moving neighborhoods.
If you want a tailored strategy for your target property or building, connect with Jamie Moody to map out your options and move forward with confidence.
FAQs
What is an appraisal gap in a home purchase?
- An appraisal gap is the difference when your contract price is higher than the appraised value, which can reduce your loan amount and increase cash needed to close.
Who pays for an appraisal in Fort Lauderdale?
- Buyers typically pay the appraisal fee as part of the loan process, though exact terms can vary by contract and lender.
Can I appeal a low appraisal with my lender?
- You can request a Reconsideration of Value through your lender by submitting better comps and documentation; the process follows lender and appraisal management company procedures.
What if I waived my appraisal contingency?
- If the appraisal is low and you waived the contingency, you are usually responsible for covering the shortfall in cash unless your contract or lender offers another option.
Are condo appraisals more likely to be low in Broward?
- Condo values can be more sensitive to building-level factors like HOA reserves, insurance, and maintenance, which may lead to tighter valuations than single-family homes.
How long do appraisals take in South Florida?
- Turn times can range from several days to two weeks or more depending on volume; busy seasons in Broward may require extra time or extensions.
