All offers MUST have No Appraisal Contingency.

[Gabriel Sanabria]

Hello all,

When a listing agent is specifying that "All offers MUST have No Appraisal Contingency." what could they be avoiding with it?

Thank you!

[Tim Herman]

@Gabriel Sanabria they are afraid the property will not appraise. Usually that is one of the reasons you can get your emd back. If it appraises for 350k and your offer is 400k you would need to bring an additional 50k to the closing table.

[Steve Vaughan]

Quote from @Gabriel Sanabria:

Hello all,

When a listing agent is specifying that "All offers MUST have No Appraisal Contingency." what could they be avoiding with it?

I was going to say hmmm, this is so last March... but you are in the hottest market of the lower 48.
They are saying you can't legally back out with an under-appraisal.   Most financing contingencies have the must appraise for PP or higher language built in so this may make a cross out and initial situation.
All this to say basically, the seller is looking for all cash offers only. 
 Is this a commercial deal?   Either way, have other contingencies like inspection that may be allowable.   Or don't bother buying in the hottest seller-'s market in the country right now.  Not every deal is good. 

[Matthew Crivelli]

Yeah, the listing agent realizes the price is way to high. They know it won't appraise, in this market I'm sure the price will drop and the contingency will be lifted after the house sits for a while. Not many people want to over pay for a home going into 2023. @Gabriel Sanabria

[Gabriel Sanabria]

Quote from @Steve Vaughan:

Quote from @Gabriel Sanabria:

Hello all,

When a listing agent is specifying that "All offers MUST have No Appraisal Contingency." what could they be avoiding with it?

I was going to say hmmm, this is so last March... but you are in the hottest market of the lower 48.
They are saying you can't legally back out with an under-appraisal.   Most financing contingencies have the must appraise for PP or higher language built in so this may make a cross out and initial situation.
All this to say basically, the seller is looking for all cash offers only. 
 Is this a commercial deal?   Either way, have other contingencies like inspection that may be allowable.   Or don't bother buying in the hottest seller-'s market in the country right now.  Not every deal is good. 

 Hi Steve,

Thank you for your response, it is a fourplex. Makes total sense what you say, practically listing agent is saying that if appraisal is lower I should come with the difference out of my pocket since I'm planning to finance it

[Gabriel Sanabria]

Quote from @Tim Herman:

@Gabriel Sanabria they are afraid the property will not appraise. Usually that is one of the reasons you can get your emd back. If it appraises for 350k and your offer is 400k you would need to bring an additional 50k to the closing table.

 Hey Tim,

Thank you for your response. As I thought, they are already afraid the property is not going to appraise for the asking price the listed it.

[Gabriel Sanabria]

Quote from @Matthew Crivelli:

Yeah, the listing agent realizes the price is way to high. They know it won't appraise, in this market I'm sure the price will drop and the contingency will be lifted after the house sits for a while. Not many people want to over pay for a home going into 2023. @Gabriel Sanabria

 Hi Matthew,

Thank you for your response, it makes sense. 

[Patricia Steiner]

Appraisal concerns are certainly a factor but it may not pass an inspection either.  When no contingencies becomes the contingency, it's an attempt to take away the normal safeguards in a real estate transaction. Before making an offer, you should have comparable sales to support the price - and if not, don't accept the mandate. I would also ask them to provide proof that the property will have an acceptable 4-point for the engagement of insurance before an inspection contingency would be waived.  Proceed with care - if at all...

[Gabriel Sanabria]

Quote from @Patricia Steiner:

Appraisal concerns are certainly a factor but it may not pass an inspection either.  When no contingencies becomes the contingency, it's an attempt to take away the normal safeguards in a real estate transaction. Before making an offer, you should have comparable sales to support the price - and if not, don't accept the mandate. I would also ask them to provide proof that the property will have an acceptable 4-point for the engagement of insurance before an inspection contingency would be waived.  Proceed with care - if at all...

Hey Patricia,

Very helpful, than you a lot for your time and input.

[Carlos Ptriawan]

I had an experience where I am a buyer and don't do appraisal contingency, but when the appraisal value is less than our offer, we reduce the offer (but still higher than the appraisal) and the buyer accepted.

[David A Lisowski]

Why is the listing agent dictating terms of your offer?

They can say they will reject any offer that has an appraisal contingency, but they can't force you to send an offer with or without contingencies.

If there's a financing contingency, the lender will supercede the listing agent's wishes. Whether "appraisal contingency" is checked or not won't matter at that point. It would only be a means to keep someone's earnest money when/if the property doesn't appraise.

[Kenneth Woodruff]

This is exactly what @David A Lisowski said. This is simply a way to keep your EMD. The lender will decide whether the deal can close based on appraisal regardless of what you agree to, no appraisal no loan, then if you don't cover the difference you lose your money. This is a deal breaker for me.

[Gabriel Sanabria]

Quote from @Kenneth Woodruff:

This is exactly what @David A Lisowski said. This is simply a way to keep your EMD. The lender will decide whether the deal can close based on appraisal regardless of what you agree to, no appraisal no loan, then if you don't cover the difference you lose your money. This is a deal breaker for me.

[Gabriel Sanabria]

Hi Kenneth,

Good to know to stay away from it. Thank you for your response. 

[Gabriel Sanabria]

Quote from @David A Lisowski:

Why is the listing agent dictating terms of your offer?

They can say they will reject any offer that has an appraisal contingency, but they can't force you to send an offer with or without contingencies.

If there's a financing contingency, the lender will supercede the listing agent's wishes. Whether "appraisal contingency" is checked or not won't matter at that point. It would only be a means to keep someone's earnest money when/if the property doesn't appraise.

 Hey David,

Thank you for your input. It’s really appreciated. 

[Kyle Baker]

Agents stuck in markets of the past haha. Especially in 4th quarter. The sellers dont hold all the power anymore like they have in the past. I dont see the GAP coverage offers being nearly as common any more. How many days has it been on market now?

[Jared Hottle]

I agree with most people on here but I would add that agents can say whatever they want but it is really the buyers and sellers that get to negotiate. Similar to selling as-is we will make no repairs but if a buyer has an inspection contingency and will back out if repairs aren't made they can negotiate. If the market is cool and they are getting no offers might as well put a appraisal contingency in it and let the seller decide if its worth giving up an offer on. 

[David Dachtera]

I'm thinking it's a way of saying, "Cash offers only" without saying as much. If it doesn't appraise, a lender might balk. 

I'd probably see about adding a replacement contingency stating that if the property doesn't appraise for the asking or offer price (which ever is less), the offer is automatically lowered to match the appraisal.

My $0.02 ...

[Gabriel Sanabria]

Thank you all for your contributions, really much appreciated.

@David Dachtera

@David A Lisowski

@Jared Hottle

@Kyle Baker

@Kenneth Woodruff

@Carlos Ptriawan

@Carlos Ptriawan@Patricia Steiner

@Matthew Crivelli

@Steve Vaughan

@Tim Herman