What Is an Appraisal Contingency?
Once you find your dream home, there are quite a few financial details you’ll need to take care of. Today, we’re going to help you get one step closer to financing by demystifying the appraisal contingency.
What Is an Appraisal Contingency?
An appraisal is a process that determines the fair market value of a home, and a contingency is a condition that has to be met before something can proceed forward. Therefore, an appraisal contingency is a condition that is set into place so that if the home you are interested in doesn’t appraise for the amount you intend to pay, the offer does not proceed forward and you can walk away with your deposit.
What Does an Appraisal Contingency Do?
The most important function of an appraisal contingency is that it protects you financially. First and foremost, it allows you to receive back a deposit if new information determined by the appraisal process makes it so that you no longer want to participate in the sale. If you don’t have a contingency in this situation, you lose your deposit money.
A buyer and seller can negotiate just about any type of contingency when executing a contract, but these are the three most common types:
- Appraisal Contingency – As explained above, an appraisal contingency includes the process of getting the home appraised. If the appraisal value comes back lower than originally assumed, this gives you leverage to try and negotiate the price down.
- Financial Contingency – This type of contingency protects you as a prospective homeowner in case funding is not able to be attained for your mortgage. With the protection of a financial contingency, you don’t have to worry about being locked into the sale until you get an approval letter from your mortgage company.
- Inspection Contingency – An inspection contingency is all about home inspections. It protects homeowners from being locked into a sale unless the prospective home passes any and all inspections, which may include foundation, roof, HVAC, mold, and pest.
Real estate agents usually recommend that you include a combination of contingencies when you become serious about purchasing a prospective home.
What Are the Benefits of an Appraisal Contingency?
So, what are the advantages contingencies provide for a prospective homeowner? Other than protecting you from being locked into a purchase, the most important benefit is that contingencies prevent you from overpaying for a home. Contingencies of all kinds can bring to your attention potential cost discrepancies, and these can be used as leverage when you want to negotiate for a lower price.
Your Appraisal Experts
Working through the financial part of purchasing a home can be stressful. Fortunately, the mortgage professionals at Butler Mortgage can help you complete the home buying process by matching you with a loan that finances your dream home at an affordable rate. With over 25 years of experience, our mortgage experts have worked with both new and experienced buyers looking to own a home in Central Florida. Whether you are searching for homes in and around Orlando, or anywhere in the state of Florida, let us help you find a loan solution that’s just right for you. To schedule your free consultation, call us today at 407-931-3800 or fill out the free consultation form online.