What Is an Appraisal Contingency in Real Estate?

An appraisal contingency lets the buyer cancel or renegotiate if the home’s appraised value is below the purchase price. It protects buyers (and lenders) from overpaying and often appears alongside a financing contingency.

✅ How an Appraisal Contingency Works

  • Deadline: buyer orders appraisal and receives the report within a set period (often 10–21 days).
  • If value is low: buyer may request a price reduction, bring extra cash, or cancel per the contract.
  • Notice required: to cancel, the buyer must give written notice before the contingency expires.

See how it appears on the settlement statement at closing.

💡 Why the Appraisal Contingency Matters

  • For buyers: ensures they don’t overpay compared to market value.
  • For lenders: loan amount is capped by the lower of price or appraised value.
  • For FSBO sellers: prepare comps and upgrades list to support value when listing via a flat fee MLS plan.

📍 FSBO Tip: Plan for Appraisal Gaps

  • Counter smart: consider appraisal-gap language if buyers offer over asking.
  • Documentation: share upgrades, permits, and comps via your MLS listing docs.
  • Next step: appraisal issues are cleared during escrow before funding.

🧩 Quick Myths

  • “Appraisals equal inspections.” ❌ Appraisals value the home; inspections evaluate condition.
  • “Low appraisal kills every deal.” ❌ Price changes or extra cash can bridge gaps.