By Lena Polnet, NMLS #17225 | Dynamic Funding Solutions, Inc.
When you make an offer on a home in Pennsylvania or Florida, the purchase price you agree to and the value the lender assigns to that property are two very different numbers. The appraisal contingency is the clause in your contract that protects you when those numbers don’t match.
Understanding how it works — and when you might consider waiving it — is one of the most important decisions you’ll make as a buyer.
What Is an Appraisal Contingency?
An appraisal contingency is a provision in a purchase agreement that makes the sale contingent on the property appraising at or above the agreed purchase price. If the home appraises below the contract price, the contingency gives the buyer the right to renegotiate, request a price reduction, or walk away from the deal without losing their earnest money deposit.
Most conventional, FHA, and VA loans require an appraisal anyway — the lender needs to confirm the collateral justifies the loan amount. But the contingency is a contractual protection on the buyer’s side, separate from the lender’s internal requirement.
How It Works in Pennsylvania and Florida Contracts
In Pennsylvania, appraisal contingency language is typically included in the standard Agreement of Sale (the form used by most PA REALTORS). The contract specifies the appraisal amount the buyer needs to proceed — usually the full purchase price — and sets a deadline for completing the appraisal and notifying the seller.
In Florida, the standard AS-IS Residential Contract and the standard Residential Contract for Sale and Purchase both contain appraisal contingency provisions. Florida contracts also tend to include a defined timeframe (typically 10 days from acceptance) within which the appraisal must be completed.
In both states, if the appraised value comes in below the agreed price, the contingency period begins — and you have decisions to make.
What Happens When the Appraisal Comes In Low
A low appraisal doesn’t automatically kill the deal, but it does create a gap. Your lender will only lend based on the appraised value, not the contract price. If the appraisal is $15,000 below your purchase price, that gap has to be resolved one of three ways:
1. Renegotiate the purchase price. The most common outcome. You present the appraisal to the seller and request a price reduction to the appraised value. Sellers often agree — especially if they want the deal to close — because a new buyer will face the same appraisal from a different lender.
2. Pay the difference out of pocket. If the seller won’t budge and you still want the property, you can cover the gap with additional cash at closing. This is a financial decision that depends on how much you have available and how much you want that specific home.
3. Walk away. If the appraisal comes in low and neither side can reach agreement, the contingency allows you to terminate the contract and recover your earnest money. This is why the contingency matters — without it, walking away could cost you your deposit.
There’s also a fourth option that’s sometimes overlooked: challenging the appraisal. If you believe the appraiser missed comparable sales or made errors, your REALTOR or lender can submit a Reconsideration of Value (ROV) with supporting data. It doesn’t always change the outcome, but it’s worth attempting before negotiating a price reduction.
Waiving the Appraisal Contingency in Competitive Markets
In hot seller’s markets — which Pennsylvania’s suburban counties and much of South Florida have experienced in recent years — buyers sometimes waive the appraisal contingency to make their offer more attractive. Without the contingency, the seller knows you’re committed to closing regardless of what the appraisal shows.
This is a legitimate strategy, but the risks are real. If you waive and the appraisal comes in $30,000 low, you’re on the hook for that difference. You need to have that cash available — and be genuinely willing to use it.
Before waiving, buyers should consider: How much cash reserves do I have beyond my down payment? How strong is my desire for this specific property? What does recent comparable sales data suggest about the likely appraised value?
I work through this analysis with buyers before they decide. In some cases, waiving makes sense. In others, it’s an unnecessary risk.
How Lena Advises Buyers on This Decision
There’s no universal answer to whether you should include or waive an appraisal contingency — it depends on your financial cushion, the market conditions, and the specific property.
What I do is walk buyers through the numbers before they write the offer. We look at recent comparable sales to assess appraisal risk, review your available reserves, and talk through what you’d do if the appraisal comes in short. That way, whatever you decide to include in the contract is a deliberate choice, not a surprise.
Frequently Asked Questions
What happens to my earnest money if the appraisal comes in low and I have a contingency? If the appraisal comes in below the contract price and you have an appraisal contingency, you can terminate the contract and your earnest money deposit is returned. Without the contingency, terminating the deal over an appraisal gap typically means forfeiting your deposit.
Can a seller refuse to lower the price after a low appraisal? Yes. Sellers have no obligation to reduce the price. But practically speaking, if they refuse and the deal falls apart, any new buyer using a loan will face the same appraisal issue. Most sellers prefer to negotiate rather than restart the process.
Does a VA loan appraisal work the same way as a conventional appraisal contingency? VA loans use a Tidewater process — if the appraiser believes the value may not support the contract price, there’s a formal process to submit additional comparable sales before the final value is assigned. VA also has an escape clause built into the loan rules that allows the veteran to walk away from a low appraisal without penalty, even without a separate contractual contingency.
Ready to talk through your purchase options in Pennsylvania or Florida? Call Lena Polnet at (215) 364-7171 or reach out through this site. Dynamic Funding Solutions, Inc. NMLS #17144.