Appraisal Contingency
A contract clause letting you renegotiate or walk away if the home appraises below the purchase price.
In plain English
An appraisal contingency protects you if the appraised value comes in lower than what you agreed to pay, giving you the option to renegotiate the price, cover the gap yourself, or cancel the contract and keep your earnest money.
Waiving this contingency to win a competitive bidding situation means you'd need to cover any appraisal gap entirely out of pocket, worth thinking through carefully first.
Worked example
You offer $420,000 but the appraisal comes back at $400,000. With an appraisal contingency, you can ask the seller to drop the price to $400,000, agree to cover the $20,000 gap in cash, or cancel and get your earnest money back.
Ask your agent how common low appraisals have been recently in this specific neighborhood, since that affects how much risk you'd be taking on by waiving this contingency.
Where you'll run into it
Guides and tools on TheBuyingPath that cover appraisal contingency in context.
Related terms
Sources
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