Appraisal contingencies: What is it & why is it important?
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
Daniel Martin, Higgins Group Private Brokerage, Licensed in CT, Lic. #RES.6767971
With over two decades of experience in Connecticut real estate, Daniel Martin is a seasoned Realtor at Higgins Group Private Brokerage, renowned for his exceptional market insight and unwavering client dedication. A lifelong Connecticut resident, Daniel's deep roots in the community, coupled with his extensive professional background, provide an invaluable advantage to both buyers and sellers across Fairfield and New Haven Counties.
Daniel's distinguished career is marked by consistent achievement, earning him the prestigious Connecticut Magazine 5 Star Realtor award from 2014 to 2025. He is a perennial Top Producer, recognized as both a Top Listing Agent and Top Selling Agent, a testament to his strategic approach and keen understanding of market dynamics. His expertise spans a broad spectrum of real estate needs, including guiding First Time Home Buyers, navigating transactions for Single and Multi-Family Homes, Land, New Construction, New Residential Developments, Condominiums, Downsizing, and Rentals.
Beyond his impressive track record, Daniel's professional affiliations include memberships with the National Association of REALTORS (NAR), Connecticut Association of REALTORS (CAR), Bridgeport Board of Realtors, Smartmls and Greenwich MLS. His foundational education in real estate from Naugatuck Valley Community College, complemented by studies at Connecticut School of Electronics and Housatonic Community College, underpins his comprehensive understanding of the industry.
Daniel's unique blend of customer service acumen and technological proficiency sets him apart. He leverages every available marketing resource to ensure his clients' homes gain maximum exposure and stand out in the competitive market.
When not orchestrating successful real estate ventures, Daniel cherishes time with his family, including his wife, two children, and four grandchildren. A passionate musician and golf enthusiast, he embodies the vibrant spirit of the Connecticut communities he serves. Daniel's network extends globally, allowing him to facilitate referrals anywhere in the world.
