Appraisal contingencies: What are they & are they beneficial?

by Rudden|Bobruska Team 07/07/2024

Once a home seller has accepted an offer to purchase their property, the end of the home selling journey may feel close. 

However, the mortgage lender of the homebuyer may appraise the property for a lower amount than the purchase price. If this happens, it’s vital to examine the terms of the appraisal contingency in the purchase contract. 


Are appraisal contingencies common?

Contingencies are put in place to protect both buyers and sellers in real estate exchanges. An appraisal contingency is very common to find on the buyer’s side of the purchase agreement. It protects homebuyers if their lender's appraisal comes back lower than the amount needed to purchase the home. 


Why would a seller not want an appraisal contingency?

Dropping an appraisal contingency clause can be very beneficial to home sellers, as it increases the chances of the purchase decision going through. 

This option can be tricky for homebuyers as it leaves them unprotected if the appraisal comes back lower than expected, but may make their offer more appealing in a competitive seller’s market.  


Can a seller back out after a low appraisal?

If the appraised value of a home is less than the listing price, the seller has the option to back out of the deal if they feel they would end up losing money. 

The seller doesn’t have to lower the price, however, if the homebuyer has an appraisal gap guarantee, they have agreed to cover the balance with their own funding if the appraisal comes back low. 

Working with your real estate agent, home buyers and seller’s can create and examine the appraisal contingency to make sure it’s best fitting their home selling and buying standards.


About the Author
Author

Rudden|Bobruska Team

Gary Rudden, Lisa Rudden, and Nick Bobruska  

RUDDEN BOBRUSKA TEAM

What sets your team apart from other real estate teams?

There is no team out in the market that offers what we do. All of us are Realtors, but

we each have specialized roles, which make our team so unique!

After decades of living and selling real estate in the DMV, we have established

ourselves as one of the top real estate teams with our market expertise and

cutting-edge technology. Our savvy high-tech marketing is on every website

and social media source. We have a huge network with other top agents, which

helps to premarket homes and discover homes for buyers before they reach the

open market. Our services include professional in-house staging services, broker

expertise in negotiating and navigating contracts, and buyer representation in all

price ranges. Each client has different needs and we create a marketing plan based

on those needs.

Our most distinct feature is our in-house construction and renovation team. We

are literally a full-service, one-stop shop when selling or buying a home!

How does the in-house construction and renovation team work?

All work is managed and completed through our licensed and bonded construction

crew. No need to call outside contractors. We are like “HGTV,” but we just don’t

have a show! Whether it’s a small makeover or a major renovation, we do it all. Our

sellers love this aspect of our team because we make preparing your home for the

market so seamless. Our buyers love the advice and insight we can give for future

renovations and repairs.

Having a licensed Maryland Home Improvement contractor as part of our team

along with the knowledge, experience, commitment and services that we offer, truly

puts our team as a vanguard in the real estate industry.