What Is an Appraisal?
An appraisal is an independent, professional opinion of a property's market value prepared by a state-licensed or certified appraiser. The appraiser inspects the property, analyzes comparable sales in the area, and considers the property's condition, location, and features to arrive at a value estimate.
In a financed Florida real estate transaction, the lender orders the appraisal to protect their investment. The lender will not fund a loan for more than the appraised value.
Florida Appraisal Requirements
Florida appraisers are licensed and regulated by the Florida Real Estate Appraisal Board under Chapter 475, Part II, Florida Statutes. Key points:
- Lender requirement — Federal regulations require an appraisal for most mortgage transactions over $400,000 (as of 2024 threshold changes). Below this threshold, lenders may use alternative valuation methods.
- Appraiser independence — The Dodd-Frank Act prohibits lenders from influencing the appraiser's conclusions. The lender orders the appraisal through an appraisal management company (AMC) to maintain independence.
- USPAP compliance — All Florida appraisals must comply with the Uniform Standards of Professional Appraisal Practice (USPAP).
Appraisal Methods
- Sales comparison approach — The most common method for residential property. The appraiser compares the subject property to recently sold comparable properties ("comps") and adjusts for differences in size, condition, features, and location.
- Cost approach — Estimates the cost to rebuild the improvements minus depreciation, plus the land value. Used for new construction and unique properties.
- Income approach — Estimates value based on the property's income-producing potential. Used for rental and commercial properties.
What Happens When the Appraisal Is Low
If the appraisal comes in below the purchase price, the buyer has several options:
- Negotiate a lower price with the seller
- Pay the difference between the appraised value and the purchase price in cash
- Request a reconsideration of value (providing additional comparable sales the appraiser may have missed)
- Cancel the contract if the appraisal contingency allows it
Related Terms
- Fair Market Value — What the appraisal estimates
- Assessed Value — Tax assessment value, different from appraised value
- Due Diligence — Appraisals are part of due diligence
- Closing Costs — The appraisal fee is a buyer closing cost
Barnes Walker Appraisal Coordination
Barnes Walker Title coordinates with appraisers and lenders to ensure timely appraisal completion on every financed closing. Submit a title inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC