What do "appraisal contingencies" allow a buyer to do?

Appraisal contingencies are a critical component of real estate transactions, specifically designed to protect buyers. When a buyer includes an appraisal contingency in their offer, they are establishing a condition that the sale is contingent upon the property being appraised at or above a certain value, usually the purchase price.

If the property's appraised value ends up being lower than the agreed purchase price, the buyer has the right to either renegotiate the terms of the contract—potentially seeking a lower price that matches the appraisal—or withdraw from the contract entirely without penalty. This means that the buyer is not obligated to proceed with the purchase if the appraisal reveals that they would be overpaying based on the property’s market value.

This mechanism is crucial for buyers because it helps mitigate financial risk—they will not be stuck with a property valued lower than what they paid for it, and they are shielded from potential future loss in equity. In summary, appraisal contingencies provide leverage in negotiations and ensure buyers are making informed purchasing decisions based on the property's fair market value.