KO Appraisal
Guide

What is an appraisal contingency?

An appraisal contingency is a clause making the purchase conditional on the property appraising at or above an agreed figure, usually the purchase price. If it does not, the buyer can renegotiate or withdraw, normally with the deposit returned. It is the buyer’s protection against paying more than a supported value.

How it operates

The clause specifies a threshold value, a deadline by which the appraisal must be completed, and what the buyer may do if it falls short. Terms vary by contract form and by state, so the specific wording governs. This is a description of the mechanism, not of any particular contract.

  • The buyer’s lender orders the appraisal after the contract is signed.
  • If the appraised value meets or exceeds the threshold, the contingency is satisfied and falls away.
  • If it comes in below, the buyer typically has options within a stated period: proceed anyway, request a price reduction, propose splitting the difference, or withdraw.
  • Withdrawal under a properly exercised contingency normally returns the deposit. Missing the deadline generally forfeits the protection, which is why the dates matter as much as the clause.

Waiving it, and what you are actually giving up

In competitive markets buyers waive the appraisal contingency to strengthen an offer. It is a real concession, not a formality, and worth being precise about.

Waiving does not mean no appraisal happens. If there is a mortgage, the lender still requires one, and still lends against the lower of price or appraised value. What waiving removes is the buyer’s right to exit or renegotiate when the value falls short. The gap must then be covered in cash, or the buyer defaults and risks the deposit.

The practical test before waiving is simple: could you actually produce the cash if the appraisal came in materially low, and would you still want the property at that price? If either answer is no, the waiver is riskier than it appears.

How it differs from the other contingencies

Appraisal, financing, and inspection contingencies are frequently conflated and cover different risks.

  • The appraisal contingency addresses value: the property is not worth what you agreed to pay.
  • The financing contingency addresses the loan: you cannot obtain the mortgage on the expected terms, for reasons that may have nothing to do with the property, such as a change in your employment.
  • The inspection contingency addresses condition: defects discovered during due diligence.
  • These overlap but do not substitute. A low appraisal may or may not cause a financing failure, depending on whether the buyer can cover the gap.

Common questions

How long is an appraisal contingency?
It runs for a period set in the contract, commonly aligned to the financing timeline. The specific period is negotiated between the parties and varies by market and contract form, so the deadline in your contract is the one that governs.
Can you waive an appraisal contingency on an FHA loan?
The contractual contingency and the lender’s requirements are separate. Waiving the contingency removes your contractual protection; it does not remove the lender’s appraisal requirement or its condition standards. FHA-specific rules apply on top, so this is worth confirming with your lender and agent before making the offer.
What does "no appraisal contingency" mean in an offer?
The buyer has committed to proceed regardless of the appraised value, covering any shortfall themselves. It makes the offer stronger for the seller by removing value risk, and correspondingly riskier for the buyer.
Is an appraisal contingency the same as a financing contingency?
No. Financing covers failure to obtain the loan for any reason; appraisal specifically covers the property not supporting the agreed price. A contract can include one, both, or neither, and they protect against genuinely different failures.
Does a cash buyer need an appraisal contingency?
There is no lender requiring an appraisal, but a cash buyer bears the full value risk directly. Some include an appraisal contingency precisely to obtain an independent check on price before committing. The protection is arguably more relevant, not less, without a lender performing that check.
Who wrote this Kevin O'Brien, MAI, SRA. California Certified General Real Estate Appraiser #3005065, issued by the California Bureau of Real Estate Appraisers (BREA). Practicing in San Diego. This page reflects how these assignments are actually handled, not a summary of other people's summaries.
Where this applies Appraiser licensing is state-specific, there is no national appraisal licence, so appraisal engagements here are California properties, primarily San Diego County. The valuation methodology and the federal tax rules described above apply anywhere in the United States; if your property is in another state, you need an appraiser credentialed there, and this page should still tell you what to ask them for.

Related reading

Next step

Tell me about the property.

Most assignments start with a short call, property type, the purpose of the appraisal, and the deadline you are working against. You get a fixed quote before any engagement, never contingent on the value reached.

Typical commercial fees range $2,000–$4,000. Residential and simpler assignments quote lower. Every engagement is quoted in advance, so the figure is known before work begins.

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