An appraisal contingency is a clause in a real estate purchase agreement requiring the property to appraise at or above the agreed purchase price before the sale can proceed. It ties the contract to a verified market value and ensures financing aligns with the buyer’s offer.
This clause protects buyers from overpaying and losing their earnest money deposit. Lenders use the appraisal to underwrite the loan, and sellers benefit indirectly by confirming the home’s value supports a financeable transaction.
Appraisal contingencies usually appear in the main purchase contract or a separate addendum labeled “Appraisal Contingency.” They spell out valuation thresholds, deadlines for ordering and reviewing the report, and next steps if the appraisal is low.
If the appraisal comes in below the purchase price, the contingency lets buyers cancel the contract and recover their deposit—eliminating the risk of sunk earnest money on an overvalued property.
Investors rely on accurate appraisals to protect their return on investment. An appraisal contingency ensures they don’t overbid and can renegotiate or walk away if the home is worth less than expected.
For first-time buyers, an appraisal contingency provides peace of mind that they’re paying fair market value. Even repeat buyers appreciate the safety net against unexpected valuation shortfalls.
Typically the buyer arranges and pays for the appraisal, though some lenders coordinate the appraisal directly. The fee can range from $300 to $600 depending on region and property type.
Contracts often allow 7–14 days from contract acceptance to complete the appraisal and deliver the report. Missing the appraisal contingency deadline may waive the buyer’s protection.
Buyers must submit written notice of any valuation objections before the contingency deadline, including a copy of the appraisal report. Sellers then have the option to accept, counter, or decline further negotiations.
Buyers can request a price reduction to match the appraised value. Sellers may agree to lower the price or split the difference to keep the deal moving.
If the seller won’t budge on price, buyers can cover the gap between the loan amount (based on appraisal) and the contract price with extra cash at closing.
If neither renegotiation nor additional cash works, buyers can invoke the contingency to cancel the contract and receive a full refund of their earnest money deposit.
Lenders will only finance up to the appraised value. A low appraisal can trigger a loan denial or require a larger down payment, making the contingency crucial for loan approval.
An appraisal contingency focuses solely on property value, while a financing contingency covers the buyer’s ability to secure a loan. Both can coexist to protect valuation and credit approval risks.
Buyers who want full protection include both clauses. In a seller’s market, buyers may waive one contingency—often the appraisal—to make their offer more competitive, but this increases their financial risk.
Inclusion guarantees a valuation check and deposit protection, reducing financial risk. It also streamlines lender approval by confirming value up front.
Sellers face the risk of deal termination if the appraisal is low. However, a strong listing price backed by comps can minimize appraisal objections and keep buyers committed.
Waiving the contingency can make an offer stand out in a bidding war. The trade-off is forfeiting the ability to back out without penalty if the appraisal falls short.
Most contracts allocate 7–14 days for appraisal completion and review, but timelines can be negotiated based on market conditions.
No—if you cancel within the contingency period due to a low appraisal, your earnest money is refunded in full.
Yes. Buyers typically present the appraisal report and request a lower price or other concessions from the seller.
Delivery of the signed appraisal addendum or written notice of appraisal objection triggers or removes the contingency according to contract terms.
Indirectly—by confirming the home’s value, it reduces the risk of financing collapse, but sellers don’t receive a direct financial benefit from this clause.
Buyers gain insight on using contingencies as safeguards. Sellers learn to price accurately and prepare for appraisal challenges. Agents benefit from clear communication and timely deadlines.
Buyers can request a shorter appraisal period to appear more competitive or secure an extension via addendum if the appraisal is delayed.
Sellers can provide recent comparable sales to support list price, offer credits for repairs, or counter with a split-the-difference proposal.
Agents should track contingency deadlines closely. Loan officers can expedite appraisal orders. Attorneys should review clause language for enforceability and clarity.
An appraisal contingency provides a crucial safety net—protecting deposits, preventing overpayment, and ensuring loan approval aligns with market value.
Consult a real estate agent or attorney when drafting or modifying contingency language to balance protection with offer strength.
For additional guidance, explore sample appraisal addendum templates and real estate contract checklists to tailor contingency terms to your transaction.
