What is an appraisal contingency?

An appraisal contingency is a clause that is included in a real estate contract, allowing the buyer to withdraw from the agreement if the property does not appraise for at least the agreed-upon purchase price. This safeguard protects buyers from overpaying for a property that may not be worth the investment as determined by a professional appraiser. If the appraisal comes in lower than expected, the buyer has the option to renegotiate the price, request repairs, or cancel the contract altogether without financial penalty. This contingency is crucial in real estate transactions as it ensures that buyers are not left financially vulnerable to significantly overvalued properties.