What Is Appraisal Contingency?
Appraisal Contingency: A contract clause that protects you if the home appraises for less than the purchase price.
An appraisal contingency lets you renegotiate or cancel, and keep your earnest money, if the home's appraisal comes in below the purchase price.
Why it matters
Lenders base your loan on the lower of the price and appraised value. If the appraisal is low, you'd need more cash to make up the appraisal gap.
Partial waivers
In competitive markets, some buyers agree to cover part of a gap. For example, "Buyer will pay up to $10,000 above appraised value." That limits your risk while strengthening the offer.
FHA and VA
FHA and VA contracts include an amendatory clause that lets you cancel if the appraisal is below the price, even if you waive the appraisal contingency.