In Utah, THE APPRAISAL CONTINGENCY allows a Buyer to cancel the contract and have their Earnest Money returned, if the property under contract appraises for less than the contractually agreed price. This contingency has deadlines by which the appraisal and cancellation need to be made.
Almost ALL Buyers should include an appraisal contingency in their offers. Some cash buyers who plan to live in the home a long time, some investors, and some other buyers may decide to forego an appraisal contingency. Usually even these buyers will only do so if they are extremely confident in their valuation and if after conducting a thorough analysis they determine that the price being offered and agreed to is a good representation of the fair market value for that home. One reason buyers may remove or exclude the appraisal contingency is to make their offer stronger than competing offers in a seller's market. But doing so is not without risks. Foregoing or removing an appraisal contingency could subject you to the possibility of paying more for the home than it is worth. Also, lenders who require an appraisal are unlikely to lend over a certain percent of the appraised value and could require you to come up with more money out-of-pocket to pay for the difference in the purchase price and the appraised value or loan amount.
An appraisal can a be a powerful tool in negotiations. In the event a property appraises for less than the contract price, you can try to negotiate with the Seller to sell you the home at the appraised value. However, there is no guarantee that the Seller will agree to lower the price to the appraised value.
In most situations a Buyer will want to include the appraisal contingency in their offer.
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