Prices are on the rise in many areas, but housing experts say appraisals don’t always immediately catch up to these sudden increases. As such, in some parts of the country sellers are reportedly insisting that home buyers waive the appraisal contingency. And some buyers who are seeing a shortage of homes for sale are agreeing to that condition, which means that if a property appraises for less than the contract price, the buyer will come up with the extra money.
The waive of the appraisal contingency has some agents concerned.
“A buyer’s agent in a no-appraisal-contingency is in a dicey position,” Bob Hunt, author of the book Real Estate the Ethical Way, writes in a recent article in Realty Times. “Buyers want what they want and will pay what they are willing to pay. But they look to their agents for guidance. While I, personally, don’t think we are in a bubble about to pop, we could be. And among those buyers who agreed to pay over appraised value, some are liable to be aggrieved. Hard as it is to believe, some might come back after their agents.”
In response, the California Association of REALTORS® created a form called “Market Conditions Advisory” during the housing bubble years that is now getting some use once again. The form includes a statement that the purchase price offered by a buyer is his decision, not the real estate agent’s. It also states that making an offer without contingencies — such as the appraisal contingency — is not recommended by the real estate broker.
Source: “Waiving Appraisal Contingency is Risky Business,” Realty Times