Appraisal Contingency | 5 Important Facts to Know

An appraisal contingency is important to understand when buying a home. When a real estate transaction involves the sale or purchase of a property, an appraisal contingency may be included in the contract. This contingency allows the buyer or seller to dispute the appraised value of the property if they are not satisfied with it. If there is a disagreement over the value of a property, it can lead to delays in completing the transaction. The agreement will include an appraisal contingency addendum to the agreement of sale. There are other contingencies with purchasing a home including home inspection, review of disclosures, and others.

Home Sale Contingent on Appraisal When Paying Cashappraisal contingency

When buyers pay cash for a property, they are not obligated to accept the appraised value. The buyer is free to negotiate a lower price if they are not satisfied with the appraised value. In this case, it can be helpful to have an appraisal contingency in place in order to protect both the buyer and seller.

The opposite situation occurs when a property owner wants to sell their property. If the appraised value is lower than their asking price, they may be able to negotiate a lower price based on their negotiating skills. Without an appraisal contingency, the seller may be forced to accept a lower offer. There are many factors that an appraiser will consider when preparing an appraisal.

This contingency can be helpful in any negotiation when a buyer is purchasing a home.. It allows both parties to feel confident about the final outcome of the transaction without any potential setbacks.

How Long is the Appraisal Contingency Period?

The time frame is negotiated in the original purchase agreement.  It allows both the buyer and the seller enough time to review the appraised value and to make a decision about whether they are satisfied with it. If there is a dispute, the period provides enough time for a resolution.

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The buyer and buyer’s agent should discuss how long it will take to have an appraisal completed with the buyer’s lender. During the housing boom, many buyers were shortening the time frame significantly.  Be sure there is sufficient time for the appraisal and the report to be completed and reviewed.

If the buyer is obtaining a loan, the appraisal needs to come in at the purchase price of the property. T

What Happens if the Appraisal Comes in Low?

appraisal contingencyInevitably, there will be times when the appraised value of a property is lower than the buyer’s desired price. In this situation, it is important to have a plan in place for how to proceed. There are several options available to the buyer, including negotiating with the seller or obtaining a loan. There can be many reasons why a home value came in low. A low value may be due to the condition of the property, recent comparables, and unpermitted additions.

It is important to keep in mind that the contingency for an appraisal is not a guarantee that the transaction will go through without any delays. It is important to discuss the contingency with both the buyer and seller before signing any documents. If there are any disagreements, it can be helpful to have the contingency for an appraisal in place so that they can resolve them without delay.

When Should a Buyer Remove a Contingency for an Appraisal?Appraisal Contingency | 5 Important Facts to Know

The contingency can be removed if the appraisal came in at value and within the original time period established. It is important to keep in mind that if the buyer is not satisfied with the appraisal, they can cancel the contract. Removing this contingency is part of the buyer’s due diligence in the home-buying process.

If the buyer is obtaining a mortgage and the property does not come in at value, then the buyer will not be able to obtain a mortgage. The lender may require that the buyer remove the contingency in order to continue with the loan process.

If you are buying or selling a property and an appraisal contingency is included in the contract, it is important to understand how it works and what your options are if there are any disagreements. The contingency for an appraisal can be a helpful tool in any real estate transaction.

Should a Buyer Negotiate the Sales Price if Appraisal is Low?

If the appraised value is not acceptable, the buyer may have to negotiate a new price with the seller. This may involve offering a lower price or renegotiating the terms of the contract.

There is no one answer to this question. Every transaction is different with differing terms and conditions. It is important to consult with a real estate agent who can help you decide what is best for your specific situation.

The buyer may really want the house and can offer to pay the appraised value of the home. If the seller declines, then the contract can be canceled. If the seller agrees to sell at the appraised value, then the buyer may be able to get a loan at the appraised value.

What is an Appraisal Contingency Waiver? Should it be Waived?

If the buyer is unsatisfied with the appraised value, they may choose to waive the appraisal contingency. This means that they are not going to have the property appraised and are going to move forward with the purchase without it. This can be a risky decision, and it is important to discuss it with a real estate agent before making any decisions.

If the buyer is obtaining financing, then waiving the appraisal is not recommended. The lender may require an appraisal, and if one is not provided, the loan may be declined. Waiving the contingency can be risky for a buyer.

Market conditions may dictate the appraisal waivers. If there is a lot of competition for the property, the buyer may choose to waive the appraisal in order to get the property. If it is a seller’s market, then the buyer may choose to have an appraisal done in order to negotiate a better price.

Should a Seller Accept a Home Appraisal Contingency?

Sellers should always discuss the home appraisal with their buyers. If the buyer is not happy with the appraisal, they may choose to cancel the contract. Sellers should also be aware of any market conditions and whether or not they want to include this contingency in their contracts.

This contingency can be a helpful tool in any real estate transaction. The purchase price of the home can be re-negotiated with the seller. However, if the seller declines, then the contract may be canceled.

Sellers may not accept this contingency if the buyer is paying cash. However, it is the buyer’s right to have an appraisal if they are not obtaining a mortgage.

Final Thoughts

If you are buying or selling a property, it is important to understand how an appraisal contingency works and what your options are. If there are any disagreements, it can be helpful to have a contingency for an appraisal in place so that they can be resolved without delay.

About the Author

The article “Appraisal Contingency | 5 Important Facts to Know” was written by Sharon Paxson, a top Newport Beach Real Estate Agent. With experience beginning in 2005, representing buyers, sellers, and landlords, we welcome the opportunity to share our expertise with you and guide you through your real estate transaction.


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Sharon Paxson is a full-time REALTOR® with EQTY | Forbes Global Properties and has been specializing in residential real estate throughout the Newport Beach area since 2005 assisting Buyer’s, Seller’s, Landlords, and Tenants with their real estate needs.

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