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Knowledge Base->Mortgage Lender->What is appraisal contingency

      The appraisal contingency is: a mortgage broker or bank will assign a professional appraiser to compare other similar sold properties to the one you are buying. When the appraiser looks at the comparable house sales around your location, he/she will place a value on the property through using a lengthy evaluation. If your offer is contingent on the appraisal of the property, here is what could happen.NoClosingCost.jpg
      If the appraisal value is lower than the sales price, you, as home buyers have the option to cancel the purchase and get deposit and earnest money back. Or ask the seller to match the appraisal value.
      If the seller is willing to reduce the sales price to the appraised value, then there should be no problem for you to continue on with the purchase.
      However, if the seller insists on a sales price higher than the appraised value, it is not unusual for the buyer to buy the property for a price above the appraisal value for many reasons. But you have risk not to get a mortgage if you do not have enough down-payment. If the market is going up, the comparisons for the appraisal just hasn’t caught up. So you are not overpaying because the market value is in fact higher than the appraised value. Another reason is if the house is a unique property that cannot be compared with other similarities in the neighborhood. For example, if it has a very large lot, or very expensive and intricate woodwork, or special styling and design, an appraiser cannot give it an appropriate dollar value, but value is certainly there.
      Many buyers, trying to compete with other purchasers, may waive the appraisal contingency, but they will still have to have an appraisal to get financing. It just means that once the appraisal is completed, regardless of the final number, they will still walk toward the closing table. This is like handing over a blank check to the seller and telling him to just write whatever he wants for the house. So It is not recommended to remove the appraisal contingency.

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