The appraisal contingency is the buyer's exit if the home appraises below the price. In a hot moment, buyers want to waive it to win. Sometimes that's smart. Often it's a promise they can't keep. Here's how I help agents decide, and the middle ground that wins more offers than a full waiver.
The short answer
Keeping the appraisal right means that if the value comes in low, the buyer can renegotiate or walk with earnest money back, as long as they act by the deadline in the contract. Waiving it means the buyer agrees to close at the contract price no matter what the appraiser says, covering any gap in cash. The middle road is partial coverage: "Buyer will cover up to $X of any gap." That shows strength and caps the risk.
Step by step
- Know what the contract says. The Colorado Contract to Buy and Sell has appraisal provisions with an Appraisal Deadline and an Appraisal Objection Deadline. Read the current form. See Colorado contract basics.
- Ask the lender how the loan treats a low value. The lender lends on the lower of price or appraised value. A low appraisal means a smaller loan and more cash needed.
- Find the buyer's real cash. After down payment, closing costs and reserves, what's left? That's the most gap they can cover. Not one dollar more.
- Check the comps yourself. Pull sold comps. If your offer price is well above them, the gap risk is real. If it's at the comps, waiving may cost little.
- Choose one of three options.
- Keep the full appraisal right.
- Partial coverage: buyer covers up to a set dollar amount.
- Full waiver: only for buyers with plenty of cash who truly accept the risk.
- Write it with approved wording. Use the contract's appraisal section and your brokerage's approved additional-provision language for gap coverage.
- Calendar the deadline. Most lost appraisal rights are lost by missing the objection deadline, not by bad luck.
- If it comes in low, act fast. Ask for a reconsideration of value with better comps, renegotiate, use gap coverage, or terminate by the deadline. See appraisal gap.
A worked example (illustration only)
Price: $550,000. Appraisal: $535,000. Buyer is putting 10% down.
| Keep contingency | Cover up to $10,000 | Full waiver | |
|---|---|---|---|
| Gap | $15,000 | $15,000 | $15,000 |
| Buyer must bring | Can renegotiate or exit | Up to $10,000, then renegotiate or exit | All $15,000 extra |
Illustration only. A lender sets the real loan amount and terms. This example ignores closing costs and loan rules. This is not an offer of credit.
How to explain it to your client
"The appraisal is the bank's check on the price. If it comes in low, the bank lends less, and someone has to cover the difference. If we keep your appraisal right, you can renegotiate or walk. If we waive it, you're promising to bring the difference in cash. A middle option: we tell the seller you'll cover up to $10,000. That makes your offer stronger without betting your savings. How much cash could you really put toward a gap and still sleep at night?"
Watch-outs
- Waiving doesn't change the loan. The lender still lends on the appraised value. The waiver just means the buyer pays the gap.
- Earnest money is on the line. If a buyer waives and can't close, they can lose it. See earnest money.
- FHA and VA have their own rules. VA has an escape clause and a value notice process. See VA appraisal process.
- Deadlines are everything. Put the Appraisal Objection Deadline on your calendar and the buyer's.
- Don't push. Explain options. The buyer decides.
Further reading
- How appraisals set value on kennarealestate.com
- Making an offer on a Colorado home on kennarealestate.com
This is training for real estate agents. It isn't legal, tax or lending advice. A licensed loan officer sets loan terms. Check with your managing broker.
Questions
What does waiving the appraisal contingency mean?
The buyer agrees to close at the contract price even if the appraisal is lower, and covers any gap.
Is partial gap coverage common?
Yes. It's a popular middle ground in competitive markets.
Can a cash buyer skip the appraisal?
Yes. With no lender, there's no required appraisal. Many cash buyers still order one for peace of mind.
What if the appraiser missed a good comp?
Ask the lender about a reconsideration of value and submit better sold comps.
Does a low appraisal mean the house is overpriced?
Not always. It means the appraiser couldn't support the price with the data used. Review the report.
Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.