Because that’s the way I was taught. Yup. That’s a common answer to a question that may get thought more than it get’s asked out loud. And that’s too bad. Change begins with asking, “Why?” Growth is stunted when we accept, “Cuz we always do”. Why do include the Appraisal Contingency in Offers? Don’t tell me to protect the buyer. That’s not a reason we use the contingency. We use the contingency because it’s there. And it’s been there since 2011. Carved in ink stone, that relic will protect a person from an imaginary threat to the point of keeping them from ever getting a chance to appraise the property…cuz they came in second.
What’s wrong with that Appraisal Contingency? It’s old and stuck in its way. It’s inflexible. It’s a seller unfriendly curmudgeon. It’s not a contingency, it’s an ESCAPE CLAUSE. Read it from the perspective of a seller… a seller who lives in a seller’s market. You can see the problem instantly…should the appraisal, which is a subjective process, show a value of even a dollar less than the purchase price the buyer CAN terminate the Offer. Will they? Probably not, but 30 days from acceptance the seller is in no good place to negotiate and without an agreement to modify the contract to something fair, the buyer is in a position to negotiate price, closing date, concessions of any kind. Smart sellers and will pass your offer over if they have a smart buyer who knows they don’t need an overkill contingency to be safe.
Savvy Realtors are proactively thinking up better conditions to create a win-win for the buyer and seller who have an offer with an appraisal contingency. This is a version you’re welcome to copy: Appraisal Contingency: In the event that said appraisal shows a value less than the purchase price, buyer shall deliver to seller a copy of the appraisal and a signed amendment to the Offer to change the purchase price to appraised value amount. Said amendment shall include no other conditions and shall allow Seller one (1) day to accept. Buyer shall not deliver the Notice to terminate provided for in this contingency prior to seller’s deadline for acceptance of the price change amendment.
If you grew up thinking your’s is not to question why, your’s is to either do or die, there’s good news—you’re not gonna die…ASK WHY and find a better way. Next contingency that has outlived it’s use is the “Buyer direct Broker to reject the listing broker’s offer of compensation. Seller to pay buyer broker ____% at closing for buyer agency fees…” This monument to old times has no good reason linger longer…you know why, right?