What happens if you donʼt have an appraisal contingency?
When you don’t have an appraisal contingency in your real estate contract, you could potentially be on the hook for covering the difference between the agreed-upon purchase price and the appraised value of the home out of pocket. This means that if the appraisal comes in lower than the purchase price, you may need to come up with the extra cash to make up for the shortfall or risk losing the deal.
What is an appraisal contingency?
An appraisal contingency is a clause in a real estate contract that allows buyers to back out of the deal if the home doesn’t appraise for the agreed-upon purchase price.
Why would someone waive an appraisal contingency?
Buyers may choose to waive an appraisal contingency to make their offer more competitive in a hot real estate market where multiple offers are common.
Can you still get a loan without an appraisal contingency?
Yes, you can still secure a loan without an appraisal contingency, but your lender will typically only lend you the amount based on the appraised value of the home.
What is the risk of waiving an appraisal contingency?
The biggest risk of waiving an appraisal contingency is that you could end up having to cover the difference between the appraised value and the purchase price if the home appraises for less than expected.
Can you negotiate after the home appraisal comes in?
Yes, you can negotiate with the seller after the home appraisal comes in if the appraised value is less than the purchase price. You can ask the seller to lower the price, you can come up with the difference in cash, or you can walk away from the deal.
Are there any advantages to waiving an appraisal contingency?
One advantage of waiving an appraisal contingency is that it can make your offer more appealing to sellers, especially in a competitive market where multiple offers are common.
How can you protect yourself without an appraisal contingency?
If you choose to waive an appraisal contingency, you can protect yourself by having a strong understanding of the local market and getting a pre-appraisal before making an offer.
What happens if you can’t come up with the extra cash after the appraisal?
If you can’t come up with the extra cash needed to cover the difference between the appraised value and the purchase price, you may need to renegotiate with the seller or potentially walk away from the deal.
Can a seller refuse to negotiate after a low appraisal?
Yes, a seller can refuse to negotiate after a low appraisal, especially if they have other offers on the table or if they believe the home is worth the agreed-upon purchase price.
Is it common for buyers to waive an appraisal contingency?
In competitive real estate markets, it is becoming more common for buyers to waive an appraisal contingency to make their offer more appealing to sellers.
Can an appraisal contingency be added later in the process?
An appraisal contingency typically needs to be included in the initial offer, but in some cases, it may be possible to add an appraisal contingency later in the process through a contract addendum.
Can sellers request an appraisal contingency be waived?
Yes, sellers can request that buyers waive the appraisal contingency as a condition of accepting their offer. Buyers will need to weigh the risks and benefits of doing so before making a decision.