An appraisal contingency in a contract affords the purchaser the ability to terminate the contract of sale should the property not appraise for a specified amount. Generally an appraisal is ordered by a mortgage broker once the contract of sale is fully executed. An independent appraiser estimates the value of the property and sends an appraisal report to the lender. Often appraisal contingencies are included into the mortgage contingency clause of the contract. If the property does not appraise for the purchase price then the purchaser will be unable to obtain the loan amount as stipulated to within the mortgage contingency clause. In this situation the contract may be deemed null and void and the purchaser will be entitled to a full refund of the down payment held by the seller’s attorney. On the other hand, if the purchaser is interested in proceeding with the transaction the purchase price may be renegotiated between the parties.
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