RE: Appraisal Contingency Newsletter


1. Removal of the Loan Contingency does not automatically remove the Appraisal Contingency.

Under the old RPA, removal of the Loan Contingency automatically removed the Appraisal Contingency. (Paragraph 31 of the old RPA). This means that once the Loan Contingency was removed, the buyer could not cancel if the Appraisal was low.

Under the new RPA, removal of the Loan Contingency does not automatically remove the Appraisal Contingency. This means that a buyer who removed the Loan Contingency can still cancel if the Appraisal is low. (Paragraph 3J3 of the new RPA).

Paragraph 3J3 of the new RPA states:

“If there is an appraisal contingency, removal of the loan contingency shall not be deemed removal of the appraisal contingency.”

This is why I recommend that Listing Agents demand that buyer remove both Appraisal and Loan Contingencies in writing at the same time.

This is why it makes sense to Counter on every deal to make the Loan Contingency also subject to removal in 17 days. Then it is clear that buyer is removing “all” contingencies at the same time.

2. Appraisal Contingency still applies for Cash Deals.

If an offer waives the Loan Contingency, then the Selling Agent will check the box at paragraph 3J4 of the RPA that states:

“NO LOAN CONTINGENCY: Obtaining any loan specified above is NOT a contingency of this Agreement. If buyer does not obtain the loan and as a result does not purchase the Property, Seller may be entitled to Buyer’s deposit or other legal remedies.”

Even if the Loan Contingency is waived, the Appraisal Contingency still applies. This means that an “all cash” buyer can still cancel if the appraisal is low.

To eliminate the Appraisal Contingency, the offer must have box 31 checked to state that the deal “is NOT” subject to an Appraisal Contingency. If box 31 is not checked on the offer, then the Listing Agent must Counter to remove the Appraisal Contingency.

3. Recommendations.

Listing Agents on a deal subject to both an Appraisal Contingency and Loan Contingency must confirm that ALL contingencies are removed in writing using the Contingency Removal form.

Listing Agents on a deal that waives the Loan Contingency (i.e. all cash) must confirm that paragraph 31 of the Offer has also been checked to state that Appraisal “is NOT” a contingency.

Understanding how Appraisal and Loan Contingencies work is critical to maximizing the benefits to your client on any deal.



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: