When it comes to buying a home, you’re likely to come across various contingencies that might seem a bit confusing. One such aspect is the appraisal contingency. Now, should you waive it or not? Let’s unpack this to help you make an informed decision.
Should You Waive the Appraisal Contingency?
This guide explains the following:
- Defining an appraisal contingency
- Why it matters in your home purchase
- When waiving it might make sense
- Considerations before deciding to waive
Here’s a closer look at each.
Defining an Appraisal Contingency
An appraisal contingency is a clause in a home purchase contract that protects you as the buyer. It states that your offer, and thus the contract, is contingent upon the home appraising for at least the purchase price. It gives you a safety net, allowing you to renegotiate or even back out of the deal without losing your earnest money if the appraisal comes in low.
Why It Matters in Your Home Purchase
Appraisals are a fundamental part of the home buying process. Lenders use them to ensure that they’re not lending more money than the property is worth. If the appraisal comes in lower than the agreed-upon price, you could find yourself needing to make up the difference, renegotiate, or walk away from the deal.
When Waiving It Might Make Sense
In highly competitive markets, you might be tempted to waive the appraisal contingency to make your offer more attractive. If you’re confident in the home’s value, have a substantial down payment, or are capable of covering a potential difference between the appraised value and purchase price, waiving this contingency could help you secure the property.
Considerations Before Deciding to Waive
However, waiving the appraisal contingency isn’t a decision to be taken lightly. It exposes you to significant financial risks. You could end up overpaying for the home or face difficulties securing a loan if the appraisal comes in low. It’s crucial to talk this decision over with your real estate agent, who’ll provide guidance tailored to your situation.
FAQ About Appraisal Contingency
Check out these commonly asked questions about the appraisal contingency. If you don’t see the answers here, please call our office and we’ll get you the information you need.
Q: What happens if the appraisal comes in low and I’ve waived the appraisal contingency?
A: If you’ve waived the appraisal contingency and the appraisal comes in low, you’ll need to cover the difference out of pocket, renegotiate the purchase price, or potentially forfeit your earnest money if you decide to back out of the purchase.
Q: Can I get an appraisal before making an offer?
A: Generally, appraisals occur after you’ve made an offer and it’s been accepted. But if you’re considering waiving the appraisal contingency, you might be able to arrange a pre-appraisal with your lender’s approval.
When it comes to your home purchase, every decision can make a significant difference. Waiving the appraisal contingency can be a strategic move, but it carries risks. Keep in mind that your real estate agent is here to help you navigate these complexities and ensure you’re making the best decisions for your circumstances.
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