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  • Writer's pictureMichael Baird

Appraisal Waiver vs. Modification

How much money do you have?

Okay, maybe that’s a little aggressive.

But, in this absurd seller’s market, the question is relevant.

Buyers are waiving the appraisal portion of their financing contingency in order to stand out to sellers. As a consequence, they’re being forced to come up with more cash.

By way of review, consider the following example, which supposes conventional 80% financing:

Purchase Price: $500,000.00

Financing Contingency: $400,000.00

Cash from Buyer (exclusive of closing costs and pre-paid items): $100,000.00

Therefore, for the buyer to qualify to borrow $400,000.00, the home needs to appraise for $500,000.00. If the home appraises for $450,000.00, the bank will only lend the buyer 80% of 450,000.00, or $360,000.00 to buy that home. Using the traditional financing contingency, the buye