Appraisal Contingency

An appraisal contingency lets the buyer renegotiate or cancel if a professional appraisal values the home below the contract price. It matters most to buyers using a mortgage, because a low appraisal can change how much the lender will lend.

Suppose a buyer agrees to pay $500,000 and the appraisal comes in at $480,000. With this contingency, the buyer can ask the seller to lower the price, cover the $20,000 gap in cash, or cancel and get the earnest money back.

Without it, a low appraisal leaves the buyer with fewer choices. They may have to bring extra cash or risk losing the deposit if they cannot close. Competitive offers sometimes limit or drop this clause, a tradeoff covered in using a bigger deposit to win an offer.