What You Need To Know About Appraisal Contingencies
When it comes to buying a home, there are certain precautions you can take that will help protect you financially. One of them is getting an appraisal contingency, which essentially means that if the home does not appraise for what you agreed to pay you are allowed to take your deposit and walk away from the deal. How does an appraisal contingency work? We’re glad you asked..
Once you find a home you would like to purchase, your lender will request a home appraisal to ensure the property isn’t selling for more than it’s really worth. During the appraisal a licensed professional will asses the home, as well as the surrounding area, and give their opinion on how much the property is worth. If the amount that comes back is lower than what you offered you can request for the seller to come down on the sale price, make up the difference in the offer price and appraisal amount, or back out of the sale entirely.
While it’s not a requirement to have an appraisal contingency, things can become extremely difficult for you as a buyer if the appraisal comes back low and you waived the clause. Having an appraisal contingency not only gives you and your lender protection from overpaying, it also gives you negotiating power and allows you to walk away if you and the seller can’t come to terms.
