Are you sure you want to rest your choices? Unfortunately, this may even mean backing out of your contract. Is a clause included in real estate contracts that protect the home buyer in the event they are unable to obtain financing. His focus is on breaking down complex financial topics so readers can make informed decisions. “The market will determine whether your home is worth the price that you put it at,” says Shea, who’s been in the business for 23 years. The appraisal will be at Buyer’s expense and will be performed by a Maryland licensed appraiser. Buyers in these cases are hopefully working with experienced agents who have either found comps to back up the higher bid or have educated their buyer on the risks — that they may have to come up with the difference out of pocket. Fannie Mae reports that when appraisals come in low, the sale is either canceled or delayed 32% of the time while the price is lowered to complete the sale 51% of the time. This contingency gives buyers time to sell their own home. If you don’t come down on price, they can choose to come up with the difference out of pocket or they can walk away from the deal with their earnest money. Scenario: A property priced at $699,000 receives multiple offers that bid it up to $745,000. She wants to make sure the appraiser sees the comparable properties she’s looked at to justify the price. That moment you get your first offer on your home — a good one at that — ah, it can feel like a Captain America-size weight has been lifted. A cash offer is an all-cash bid, meaning a homebuyer wants to purchase the property without a mortgage loan or other financing. While a full price offer can send your mind straight to “pop the champagne, break out the boxes, and let’s get packing,” the reality is your buyer still has a few opportunities to rescind their offer before the deal is done. But if your home isn’t in a seller’s market with high demand and this is your only offer, it’s best to make it work if you can. Waiving the appraisal contingency can be a risky move in a multiple offer situation. So let’s dive into what this appraisal contingency is, how it works, and what it can mean for you as a seller. A financing contingency, also known as a loan contingency. Loan Contingency If the buyer is using a bank loan to obtain part of the purchase price, you should expect a loan contingency , also known as a financing contingency or mortgage contingency, to be part of the offer. That way, if the buyer loses their job in a year and needs to turn around and sell the home, they know they’ve bought it at market value and likely won’t be underwater when it comes time to list themselves. A contingency clause defines a condition or action that must be met for a real estate contract to become binding. These offers are often more attractive to sellers, as they mean no buyer financing fall-through risk and, usually, a faster closing time. Section 2 is where the appraisal contingency lies. “That’s your best situation because now if you have a discrepancy between the appraised value and the price that all the parties have agreed to, you’re more likely to have a buyer that’s willing to work with you,” explains Shea. Sometimes, they can get another appraisal—a second opinion used to confirm or adjust a home’s appraised value. That’s how home buyers are looking at your listing. In addition to this type of contingency, there are several others that are commonly used as well. The appraisal contingency is often separate from the loan contingency. If you luck out and accept an offer from an all-cash buyer, you can avoid the appraisal contingency completely — or at least lessen the potential of a low appraisal harming your deal. For example, if you make an offer without an appraisal contingency and the property appraises for less than the purchase price, you may need to make up the difference in cash … Appraisal Contingency An appraisal contingency is very reasonable, and protects the buyer (as do all contingencies) in the case that the house actually appraises at the correct value. Appraisal Contingency. Lastly, sellers may offer to help the buyers by extending seller financing—a mortgage between the buyer and the seller that doesn’t involve a bank or other lending institution—to cover part of the purchase price not covered by the buyer’s down payment or lender. For example, if you are making a 20 percent down payment on a $500,000 home, your lender has agreed to loan you 80 percent of the home’s value, or $400,000. Catherine has 8 years of experience as a writer and editor. 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