https://www.youtube.com/watch?v=RXVzOWWQnNg&list=WL&index=2&t=17s

Summary:

Waiving an appraisal contingency means agreeing to buy a property at the purchase price regardless of the appraised value. This is common in competitive markets but should be approached with caution.

Key Points

  1. Risk of Waiving Contingencies: Avoid waiving contingencies unless necessary, as it limits your options to exit the contract.
  2. Understanding Appraisal Waiver: Waiving an appraisal means you commit to the purchase price even if the property appraises lower, affecting your loan terms.
  3. Loan Implications: Loan terms are based on the appraised value, not the purchase price. For example, a VA loan will not exceed the appraised value.
  4. Financial Preparedness: Only waive the appraisal if you are prepared to cover the difference between the appraised value and the purchase price.
  5. Comparable Sales: Always review comparable sales to ensure the property’s value aligns with the purchase price. Never trust the listing price alone.
  6. Consultation: Always discuss with your lender and real estate professional before waiving an appraisal to understand the financial implications.

Final Advice

Understand the risks, ensure financial preparedness, and make informed decisions by reviewing comparable sales before considering waiving an appraisal contingency.

Introduction to Waiving Appraisal Contingencies

I actually just got this question and I was like this is a great video. Is it a good idea to waive appraisal contingencies or not? I don't know what to do. Okay, so let's talk about what waiving an appraisal contingency means.

When to Consider Waiving Appraisal Contingencies

We often see this in competitive markets. Sometimes I see real estate agents doing this in non-competitive markets, and it is a huge red flag. The reason it's a red flag is you should never be giving up any contingency unless you have to. Anytime you're giving up a contingency, you are putting yourself in a box. You're giving yourself fewer options to get out of the contract. I have seen that before where it's not even a competitive market, but the real estate agent waived all the buyer contingencies. There was no need for it, but guess what it does? It guarantees that that real estate agent's going to get a paycheck because the buyer has no way out unless they lose their earnest money, which generally in those circumstances they do. So, number one, do not waive anything unless you're in a competitive market. Of course, talk to your real estate professional about this, but as a lender, when I see that I cringe so hard.

Understanding the Implications of Waiving Appraisal Contingencies

Let's say you're in that competitive market and everybody's waiving appraisals. So waiving an appraisal means that you're saying, "Hey, no matter what the property comes in at, I will buy it at the purchase price." So if you're in contract for $600,000 and you waive the appraisal, the appraisal comes in at $550,000, you are responsible for finding a way to still buy that house at $600,000.

Loan Terms Based on Appraised Value