VIDEO – WHAT IS THE APPRAISAL CONTINGENCY?
In this edition of The Real Estate Breakdown, Pey Behin describes the appraisal contingency portion of the residential real estate sale contract (With outtakes). Typically, this is the next contingency in the timeline of buying a home, with the first one being the home inspection.
WHAT IS THE APPRAISAL CONTINGENCY? VIDEO TRANSCRIPT:
“Hello. Today, we are talking about the wonderful world of appraisals [snore]. Sorry. Pop a caffeine pill, we’re going for a ride.
So, the appraisal. Sounds simple enough, but what exactly is the appraisal contingency? Essentially, that protects you, the buyer, if it appraises for less than what you offer. This is how it works, once your offer is accepted, the lender will send out an appraiser to the home to appraise the “value.” And this is because in the event you don’t pay your mortgage, of course you will, they have to be able to recoup what they gave you.
The appraiser is going to look at this home, and the recent sales in the area, and also what is known as “comps.” If the value of the home comes in at, or higher than what you offered, do a little dance. (I’ve never been able to do that.) Because you’re golden. But every once in a while, homes will appraise for lower than the offer price.
Now, say the home appraises for $20000 less than what you offered, the appraisal contingency is there to protect you. Now, you have the right to go back to the seller, and renegotiate the sales price. And if the seller doesn’t want to lower the price by that $20000 difference, you have the right to walk away from the deal, and get your earnest money deposit back – no harm no foul. On to the next one, on to the next one.
Now, in our current market where nearly 45% of all homes are getting multiple offers, there are ways to make your offer more competitive by waving the appraisal contingency. In the event it under-appraises, we can still protect you with the financing contingency in a couple more steps. I’ll get into that in another video. The email is below, I’d be more than happy to answer any of your questions. Facebook, Snapychat, IG, aka The Gram, or tweeters, all the same name. Pey Behin, signing off.”
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