Understanding an Appraisal Contingency
An appraisal contingency is a clause in your purchase contract that protects you if the home appraises for less than the agreed purchase price. It’s one of the most important safeguards in any home purchase.
How It Works
After your offer is accepted, your lender orders an independent appraisal to confirm the home’s fair market value. If the appraisal comes in at or above the purchase price, everything proceeds normally. If it comes in below, the contingency gives you options.
What Happens If the Appraisal Is Low?
Negotiate a lower price. Ask the seller to reduce the price to match the appraised value. Many sellers will agree rather than risk losing the deal.
Cover the gap. You can pay the difference between the appraised value and purchase price out of pocket. This requires additional cash beyond your planned down payment.
Walk away. With an appraisal contingency, you can cancel the contract and get your earnest money back if the home doesn’t appraise at the agreed price.
Should You Waive the Appraisal Contingency?
In competitive markets, some buyers waive this contingency to make their offer more attractive. This is risky — if the home appraises low, you’re committed to covering the difference. Talk to your QuickFund loan officer before making this decision.