The Real Estate Browser Volume 7, Issue 14 | Page 8

8 — Say you saw it in The Real Estate Browser of Lynchburg — Volume 7 Number 14

www.LynchburgRealEstateBrowser.com

Understanding the Appraisal Contingency
by Dan Vollmer, Associate Broker, ReMax 1st Olympic
Remember Antiques

The Perkins. Both parties have agreed that the

Roadshow? I’m not sure if its

sales price will be $200,000. The Smith’s lender

even still on, but the premise of

orders and appraisal, and when the report is com-

the show was that folks would bring their antiques

pleted, the value is determined to be $190,000.

- or something they had bought at a yard sale or

(Incidentally, this topic is ‘top-of-mind’ for me

found in grandma’s attic - and get a professional
to tell them what it was worth. The whole reason
most people watched the show - or participated on
it - was for the possibility that they had bought or
found something worth a fortune.
I mention that show because the concept of an
‘appraisal’ is experienced in different ways in our
culture. If you’ve had jewelry appraised, that’s one
format. Antiques or valuables is another way. I’d
say the most common experience most of us have

because I’ve experience this situation more times
this year than in the past several years combined.)
Okay, so now we have a situation. Appraised
value is less than the agreed-upon purchase price.
What happens now? Based the contract (for our
purposes, I’ll be quoting directly from the Lynchburg
Association of REALTORS Purchase Agreement) ,
the buyer has two options:
1. They “have the privilege of proceeding with

with appraisals comes as part of the home buying

consummation of [the contract] without regard to

experience. In spite of the fact that all home buy-

the amount of the appraised value;” or they can:

ers (at least those who financed their purchase)
have received an appraisal, the way the appraisal
functions can still cause confusion.
I think most buyers understand that one of the
contingencies in a purchase contract is an appraisal
contingency. This protects the buyer from having
to purchase a home that is valued (by an appraiser)
at less than they have agreed to pay. But what happens when the appraised value is determined to be
less than the contract price? What are the buyer’s
options at that point? That’s where I’d like us to
focus our attention.
So let me also set up a scenario: The Smiths
have made an offer to buy a home from the
http://www.lynchburgrealestatebrowser.com/index.php?/properties/price_reduced
http://www.lynchburgrealestatebrowser.com/index.php?/properties/price_reduced

for the latest REDUCED properties.

2. “Make a written request to the seller… for
a reduction in the purchase price, so long as the
reduced purchase price is not lower than the
appraised value…”
Notice that one of the options provided to the
buyer is NOT to terminate the contract and walk
away.
By the contract, the buyer has two alternatives.
The first one is to proceed with buying the home,
regardless of the appraised value, and just making up the difference themselves. In the scenario
posed above, the Smiths would say to the Perkins:
“we still love your home and want to pay $200,000
for the NEWEST LISTINGS.

http://www.lynchburgrealestatebrowser.com/index.php?/properties/newest_listings