NEW YORK – Some buyers looking for a luxury home in a competitive market waive the so-called appraisal gap to entice a seller to accept their offer.

Appraisal gaps happened in about 11% of residential transactions in June 2023, according to CoreLogic. They occur when homes appraise for less than the contract price, and often arise in tight markets where buyers have to bid above the asking price to secure a home. If a home’s appraisal comes in $30,000 below the agreed contract price, these buyers agree to pay that amount in addition to existing monetary terms.

“We’re still seeing supply and demand challenges in certain markets,” says Shawn Telford, CoreLogic’s chief appraiser. “There are gaps between the contract price someone’s willing to pay and what the market data shows the home would likely be selling for in a typical market without the undue influences of the fear of missing out.”

Donna Soda, an agent with Premier Sotheby’s International Realty in Lakewood Ranch, Fla., says appraisal waivers can incentivize a seller to accept one buyer’s offer over another. She has had deals where the appraisal came in below the purchase price, and the buyer and seller renegotiated to lower the price. But she has also had a deal where her clients agreed to waive the appraisal gap and had to come up with an additional $100,000 in cash at closing when the appraisal came in too low on a $2.3 million purchase.

“That was during the pandemic buying frenzy,” Soda says. “In 2020 and 2021, you would blink your eyes and a property would be off the market.”

Source: Wall Street Journal (09/03/23) Friedman, Nicole

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Sadly for some time we see a number of sellers who are not keeping up with the changes locally; often putting their homes on the market and selling them for less than what the market can bear.  Additionlly; selling a home the first day on MLS may not guarantee the best price for the seller / homeowner.  Please call Barry at 239-360-5527 for more information.

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We continue to see many people planning ahead, and buying that second home now, rather than waitiang as they were planning to do; especially with Snowmads and Zoombirds working from home.  Previously we had Snowbirds; interesting how terminology keeps changing / evolving.  Hurricane Ian prompted some buyers to start looking again, while other buyers had pulled back momentarily.

Interest rates increases have sadly driven some buyers out of the market place, we do see price reductions on some overpriced and / or under marketed listings.  Even with recent interest rate hikes, buyers are still looking, but showing more prudency than before as we Secure Real Estate Deals for them.  Properties are still selling as it trends towards a more balanced market.

Relatively low inventory overall is still a challenge for active buyers who are not prepared on some property types; but if prepared you are ahead of the game; ask how we can help with all of that.  We do see more listings coming to the market here in Southwest Florida, so, that is good.

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