What is an Appraisal Contingency?
In obtaining a mortgage on a home many times an appraisal is required by your lender to determine the home’s market value is supported by an appraisal to ensure collateral is adequate. In this offer process it very common to note that the offer is contingent on a satisfactory appraisal being received and reviewed. This article will detail out the importance of the appraisal contingency.
Once the offer for a home comes in it is very common for an appraisal to be required on the property to ensure the value and the condition of the property are satisfactory. This protects the buyer from a possibly deficient property as far as condition but moreover on the value of the purchase price being supported by recent sales and the appraisers value of opinion.
Consider this a safety valve for the buyer in creating a way for them to back away and retract their offer and the easy return of the earnest money deposit which accompanied the offer. The earnest money deposit or EMD is typically 1 – 3% of the purchase price so it can be substantial.
If the appraisal does come back lower you may have options to a) negotiate a lower purchase price, b) ask for seller concessions or c) back out of the offer or rescind the offer.
The appraisal contingency is one of a few contingencies which can be included in the offer. Others are a home inspection contingency, a mortgage contingency or even pest, mold or foundation contingency.
As always you should consult your Loan Officer at Hall Financial to learn more about the overall process and for sound financial mortgage and real estate guidance.
For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.