The issue of appraisal contingencies came up in discussion on my WordPress real estate blog yesterday. I had published a blog post to explain What Happens if the Home I'm Buying Doesn't Appraise? when I received a comment from a colleague reminding my readers to make sure their offer contains an appraisal contingency and/or mortgage contingency to protect the buyer.
Apparently, although real estate principals are similar from state to state, the actual documents that we use can vary greatly from state to state. The New Mexico purchase agreement paperwork contains an appraisal contingency, so I had assumed every purchase contract had an appraisal contingency built into it, but apparently this is not so.
Indeed, whether or not it's standard language in your state, every purchase contract should have an appraisal and mortgage preapproval contingency in it to protect the homebuyer in the case the house they're trying to purchase does not appraise for value.
What happens if the house you're trying to buy doesn't appraise? Please watch this 1'28" video to find out:
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