What is an appraisal contingency
in a New Jersey home sale?
An appraisal contingency lets a buyer renegotiate or withdraw if the lender's appraisal comes in under the contract price. The standard contract form used for New Jersey home sales does not include one.
- An appraisal contingency is a condition that lets a buyer renegotiate or withdraw if the lender's appraisal comes in under the contract price
- The New Jersey statewide form does not print one. On that form a value under the contract price cancels nothing on its own
- The buyer's protection there runs through the mortgage contingency, because a lender that will not lend on the appraised number can leave the commitment unmet
Term. Written by The JK Realty Group.
An appraisal is a licensed appraiser's independent opinion of what a house is worth, ordered by the buyer's lender. An appraisal contingency is a condition in the contract that lets the buyer renegotiate or withdraw if that value comes in under the agreed price.
The standard New Jersey home sale contract form does not include an appraisal contingency as one of its standard clauses. On that form, an appraisal below the contract price does not end the deal by itself. It can still affect the loan. If the lender will not lend on the appraised value, the buyer may not get the mortgage commitment, the lender's written approval of the loan, that the contract calls for. The form's mortgage contingency is the section that covers what happens when that approval does not arrive.
For example, say a buyer in Gloucester County is under contract at $400,000 and the appraisal comes back at $385,000. The contract is still in place. The $15,000 between the two numbers is called an appraisal gap, and what happens next depends on what the buyer and seller wrote into their agreement and on what the lender does with the lower value. These figures are an illustration, not an offer or a quote.
What to ask, and who answers it: your lender can explain what a lower value would mean for your loan. Your agent can walk you through how your offer is written. What a particular clause means for your own situation is worth confirming with your broker, or with a licensed New Jersey attorney during the contract's attorney review period.
Our take
A deal often carries documents beyond the statewide form, and some loan programs bring their own paperwork on a low appraisal. If you are writing an offer, ask how yours handles a short appraisal before you sign it.
Have a question about writing an offer? Let's talk.
Related: Buyer's Agent in South Jersey Selling Your Home in South Jersey
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Add The JK Realty Group as a preferred source on GoogleThe figures in the example are illustrative, not an offer or a quote. This is general information about how the statewide form works, not legal advice. General information, not advice about any specific property. The JK Realty Group, brokered with OMNI Real Estate Professionals. Equal Housing Opportunity. See our Terms of Use for how we source and credit these posts.
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