Home Buying Process
How Appraisal Contingencies Work
Your Roadmap to a Confident Home Purchase
Whether you’re buying for the first time or the fifth, having a clear understanding of the home buying process makes all the difference.
My comprehensive Home Buyer Overview walks you through every stage—from financing and offer strategy to inspections, closing, and beyond—so you can navigate your purchase with clarity, confidence, and fewer surprises.
When it comes to making an offer on a home, understanding how appraisal contingencies work is critical—especially if you’re using financing. In this video, Adam breaks down the different types of appraisal protections, including gap guarantys and how they affect negotiations. It’s an important watch for any buyer submitting a conventional, FHA, or VA loan offer in today’s market.
What You’ll Learn in This Video:
The difference between FHA/VA and conventional appraisal contingencies
What an appraisal gap guaranty is and when it applies
How the appraisal negotiation and buyer election periods work
What your options are if the home appraises below contract price
How to decide whether to waive or include an appraisal contingency
What’s on the market now? Customize your home search.
Ready to start the process? Schedule a brief conversation.
Adam Tabaka (00:00):
Alright, let’s talk appraisal contingencies. Now, if you’re using FHA or VA financing, your contract will include an appraisal contingency that cannot be waived. With both types of financing, there is no appraisal contingency deadline. If you’re utilizing conventional financing, you may choose to invoke or waive the appraisal contingency. If you choose to invoke the appraisal contingency, you must specify a contingency deadline.
(00:27):
With conventional financing, you may opt for a traditional appraisal contingency or an appraisal contingency with a gap guaranty, meaning that if the appraised value is only a certain amount below the contracted sales price, you’ll agree to continue to settlement and cover the delta. Only if the delta between the appraised value and the contracted value is larger than the gap guaranty, would negotiations potentially take place.
(00:54):
Regardless of financing type, if the appraised value comes in below the contracted sales price or below the contracted sales price, less the gap guaranty as the case may be, and if you have the cash to cover the delta, and are willing to do so, you may do so and proceed to settlement under the contracted sales price. If on the other hand, you do not have the cash to cover the delta or do not wish to cover the delta in part or in whole, there is a negotiation period specified in the contract (often we see three days) during which you and the seller attempt to come to a meeting of the minds on a new sales price.
(01:30):
If an agreement is reached, an addendum is signed, and you proceed to settlement at the new agreed upon sales price. If at the end of the negotiation period, an agreement is not reached, you’ll have what is called a buyer election period. Often just one day, the buyer election period is your opportunity to decide whether to settle at the contracted sales price or void the contract.
(01:53):
Whether it makes sense to invoke or waive the appraisal contingency with a conventional offer depends on your personal finances, personal preferences, and market conditions.
(02:03):
Want to learn more? Check out my Home Buyer Overview. Ready to get the process started? Give me a call or schedule time with me down below. Until next time, take it easy.
Your Roadmap to a Confident Home Purchase
Whether you’re buying for the first time or the fifth, having a clear understanding of the home buying process makes all the difference.
My comprehensive Home Buyer Overview walks you through every stage—from financing and offer strategy to inspections, closing, and beyond—so you can navigate your purchase with clarity, confidence, and fewer surprises.