Appraisal Contingency Clause

Appraisal Contingency Clause

An appraisal contingency clause is a provision typically included in a real estate purchase agreement that allows the buyer to back out of the transaction if the property does not appraise for a specified amount. This clause is designed to protect the buyer by ensuring that they are not obligated to proceed with the purchase if the property’s appraised value is lower than the agreed purchase price.

When an appraisal contingency clause is in place, the buyer usually has a certain timeframe in which to conduct the appraisal. If the appraisal comes in lower than expected, the buyer can negotiate with the seller to lower the purchase price or, if an agreement cannot be reached, the buyer has the right to withdraw from the contract without penalty.

For example, if a buyer agrees to purchase a home for $300,000 but the appraisal reveals a value of only $280,000, the buyer can invoke the appraisal contingency clause to renegotiate the price or cancel the sale. This clause helps to ensure that the buyer does not pay more for a property than it is worth, thus providing a layer of financial protection in real estate transactions.