Kevin, Home Buyer in District of Columbia

what does Contingent on Appraisal mean?

Asked by Kevin, District of Columbia Sat Dec 4, 2010

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Contingent on appraisal means that if the appraiser issues a report that says the property is worth less than the amount specified in the contract that the seller will have the option of selling the property at appraisal OR the buyer can come out of pocket for the difference between appraisal and sales price (almost never) OR one of the two parties can declare the contract null and void.
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0 votes Thank Flag Link Mon May 23, 2011
Great advice, everyone! I agree -- always get an appraisal contingency. In today's market, where banks have a tendency to undervalue, it can be your lifesaver!
0 votes Thank Flag Link Sun Dec 5, 2010
Good Morning Kevin;
If the purchase amount of the property that is under contract equals or exceeds the appraised value of the property you can proceed to close.
If not, the contract busts unless both parties re-negotiate the contract.
The appraisal is usually performed by a certified appraiser who reports to either the buyer (if cash) or the lender (if financing).
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0 votes Thank Flag Link Sun Dec 5, 2010
Bottom line is, it's a huge safety net for you. No matter what you offer on a property, even if it's over list, you want an appraisal contingency! If the appraisal comes in below what you offered, you immediately ask the seller to lower the price to the appraised value (after provifding a copy of the appraisal).

If the seller refuses, you walk away, get your earnest money deposit back, and keep looking. The appraiser is working for you and your lender so they're going to make sure what you buy is worth what you're paying!
0 votes Thank Flag Link Sun Dec 5, 2010
It means, when the buyer is buying a home with a loan instead of cash, his lender will send an appraiser out to make sure the home appraises at the price you offered for your purchase. If you offered $550,000 and the appraisal comes in at like $540,000 then the seller will either have to lower their purchase price $10,000 or hope a buyer comes along who wants it bad enough and is willing to pay the extra $10,000 in cash above the appraised value. When making offers, you want to make sure your agent NEVER waives the appraisal contingency on the offer form. It protects your offered price and says that your offer is contingent upon the appraised value coming in at your offered price. This is done 99% of the time when buying a property with a loan, usually on cash purchases an appraisal is not done...but it could be, if it is made part of the deal.
Sheyenne Schultz
Real Estate Network Group
2601 Airport Drive #120
Torrance, Ca 90505 310-429-4170
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0 votes Thank Flag Link Sun Dec 5, 2010
Hi Kevin
Having a home appraised is an important part of the mortgage and home buying process.
An appraisal contingency is important to have, as it is protection for you, the buyer, should the house not "appraise out" .

If the house appraises at a number LESS than your offer, the sellers would have to lower the price to match it, or you would have the right to walk away --- now, this is what is usually done, I suggest you check this, and verify it with your agent or real estate attorney.

Good luck!
0 votes Thank Flag Link Sun Dec 5, 2010
Hi Kevin:

It means that if the Home that you are interested in Purchasing does not Appraise for as much as the purchase Price that you have negotiated, then the Sale transaction may not Continue. You need to look and read all of the Contract Details regarding exactly what happens if this were to happen. Do you get your Earnest Money back without Penalty? Can you continue the Sale if you want? Can another Appraisal or 2 be ordered? Typically, this clause is to your benefit if you are the Buyer.
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0 votes Thank Flag Link Sat Dec 4, 2010

You make me miss home (Fairfax VA).

Contingent on appraisal means your offer requires the appraisal to be at or above your offered contract price. It usually comes with a time frame to complete. A contingency is provision in the contract that needs to be removed before closing the transaction. It is best to ask your REALTOR according to what your time frame is. He/she is responsible to coordinate meeting that time frame with your loan officer.

Best of Luck with your home buying!
0 votes Thank Flag Link Sat Dec 4, 2010
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