What might trigger the buyer to invoke an appraisal contingency?

Invoking an appraisal contingency occurs when the appraised value of a property is found to be lower than the sale price. This contingency is designed to protect the buyer in scenarios where the property's value, as determined by an independent appraiser, does not meet or exceed the agreed-upon price between the buyer and seller. If the appraisal comes in low, it may affect the buyer's ability to secure financing, as lenders typically will not finance more than the appraised value. As a result, the buyer has the option to negotiate the price, ask the seller to address the difference, or walk away from the contract without penalty if a contingency for this situation is included in the agreement.

This situation does not arise from the inability to secure financing, a change of mind about the purchase, or the discovery of defects in the property, as those scenarios do not directly relate to the appraisal's outcome regarding the property's market value.