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Appraisal Contingency (As-Is Value)

When a lender orders an appraisal, one of the values of interest is the As-Is value; what the property is worth now. The percentage provided towards purchase is actually a percentage of the Purchase Price OR As-Is value, whichever is less. Ideally the borrower is purchasing at a discount (the fees it would cost to sell the property) to what the property is currently worth, and purchasing built in equity. That way if the property needed to be sold immediately after purchase (by either the borrower or the lender), it wouldn’t be at a loss. But what if the as-is value appraises lower than the purchase price?

A borrower had the following contingency in their contract;

Appraisal Contingency: If the appraised (as-is) value as represented in the Buyer’s lender’s appraisal is less than the total Purchase Price in the Contract, then upon notice to the Seller including a copy of the appraisal, the Seller shall reduce the Purchase Price to match the value of the Property as listed in the appraisal, or, if the Seller declines, then Purchaser may elect to cancel the Contract and receive back the initial and additional contract deposits.

Mark Abramovich