Process

Appraisal Contingency

An appraisal contingency is a clause in your purchase contract that lets you back out, or renegotiate, if the home appraises for less than your offer price, usually without losing your earnest money. It's a safety net for buyers. In hot markets, some buyers waive it to compete, which adds risk if the appraisal comes in low.

A contingency is just a condition in your contract that has to be met for the deal to move forward. The appraisal contingency ties the sale to the home appraising at or above your price, and if it doesn’t, you can renegotiate, ask the seller to meet you partway, or walk away with your deposit.

Waiving it can make your offer stronger in a bidding war, but it means you’re on the hook to cover any shortfall in cash. That’s a real decision with real dollars, and I’ll make sure you understand the exposure before you give up this protection.

Related terms

Appraisal

An appraisal is an independent estimate of a home's market value, done by a licensed appraiser the lender orders. It protects the lender, and you, from paying more than the home is worth. The appraiser compares the home to similar recent sales nearby. If the value comes in low, it can change your loan or your negotiations.

Appraisal Gap

An appraisal gap is the difference when a home appraises for less than the agreed price. Say you offer $405,000 and it appraises at $390,000: that $15,000 gap is money the lender won't finance. You'd need to cover it in cash, renegotiate the price, or walk away if you have an appraisal contingency.

Earnest Money

Earnest money is a good-faith deposit you put down when your offer is accepted, showing the seller you're serious. It's usually held in escrow and applied toward your down payment or closing costs at closing. If the deal falls through for a reason your contract protects, you can often get it back.

Last updated: June 13, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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