How an Appraisal Contingency Works in Maryland

by Bryan Kerrigan

An infographic detailing what happens when a home doesn't appraise, showing an example with a $720,000 contract price and a $700,000 appraised value, highlighting real estate options like reducing the price, negotiating, or canceling the contract under a Maryland appraisal contingency.

So your home sale contract includes an appraisal contingency. What does that mean?

For the Buyer, an appraisal contingency is like an insurance policy (with option to cancel) to validate that the price they agreed to pay for your home is reasonable, relative to the price other buyers paid for similar homes in the community.

Let’s say a Buyer agreed to pay $720K for your home. Assuming there’s a loan for the purchase, the lender orders an appraisal and an appraiser evaluates square feet, features & finishes and then compares your home to other sold properties in the area to come up with an “appraised value” for your home. If the appraised value meets or exceeds the $720K sale price in the contract, all is well and the contract moves forward.

But, if the appraised value comes back below the sale price, the Buyer will ask you to reduce the sale price to the appraised value. This is a negotiation, so you can either agree to the original request, or say NO, or you might say, why don’t we split it down the middle and reduce the sale price half way between the original sale price and the appraised value (or anywhere in between) and the Buyer covers their part in cash.

If you and the Buyer come to an agreement, the contract moves forward, but if not, the Buyer can cancel your contract.