Definition
A condition in a home purchase contract that allows you to back out if the home’s appraised value is lower than expected. It protects you from overpaying.
What to consider
- Use this contingency to protect yourself from overpaying.
- Ensure the appraisal is done by a trusted professional.
- Be prepared to renegotiate if the appraisal is lower than expected.
Real world scenarios
- After the appraisal comes in lower than expected, Kerry invokes the contingency to renegotiate the purchase price.
- Mike’s offer includes an appraisal contingency, protecting him from overpaying if the property’s value falls short.
- Because the house appraises at asking price, Shira’s contingency isn’t triggered, allowing an immediate close.
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