What is the Appraisal Waiver Addendum?

Dated: June 9 2021

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Today’s real estate market has sellers loving the huge increase in their home's selling price. With the low supply of housing inventory, and the increasing number of buyers, buyers are finding themselves competing with multiple offers, including multiple cash offers. Buyers, utilizing financing, can remain competitive if they are willing to use the Appraisal Waiver Addendum. Here is a breakdown of how the addendum works:

1)  Paragraph 1 - Waiver

When this box is checked, the buyer is waiving their right to terminate entirely if the appraised value comes in lower than the contracted amount. For example:  If the contract price is $400,000 and the appraised value is $300,000, the buyer will move forward with the home purchase and will bring the difference in cash to closing. In this case, the difference is $100,000.

2)  Paragraph 2 – Partial Waiver

This option is similar to paragraph 1, but you place a limit on the appraised value, based on what you can afford. Using the same values as example 1, let’s take a look at the partial waiver:

Contracted price of $400,000

Partial Waiver amount $350,000

 

In this case, you are telling the seller that the home must appraise for $350,000 or higher. For example, if the home appraises for $360,000, the buyer will bring the $40,000 difference in cash to closing.

 

3)  Paragraph 3 – Additional Right To Terminate

This option is the least attractive to the seller, as the buyer will include the number of days they have to terminate the contract should the appraised value not be met. The number of days on this form is usually longer than the number of days on the Third-Party Financing Addendum. This gives the buyer an additional exit to the contract.

With this option, the buyer can also stipulate an appraisal amount they can afford, similar to paragraph 2.

With homes moving so quickly, the sellers are able to demand more from would-be buyers. As prices have escalated, the Appraisal Waiver Addendum offers conventional buyers a solution for competing against the cash buyer.

FYI, the waiver can only be used when the buyer is financing with a conventional loan.   

I would love to hear from you. You can send me your questions via the comment section, and I will get back to you.

Janet Wingrove has been a licensed realtor in the State of Texas since 2007 and has been selling real estate in San Antonio ever since. "My #1 goal is to help you achieve your real estate dreams!" - Janet

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