Should First-Time Buyers Waive the Appraisal Contingency in This Market?
Short answer: most first-time buyers should not waive the appraisal contingency completely. Waiving it only makes sense when you have cash set aside to cover a low appraisal and you would still be glad to own the home at the price you offered. If that cash isn't there, waiving the contingency doesn't make your offer stronger. It just moves the risk from the seller onto your savings and your deposit.
There are smarter middle-ground options, and if you're using a VA or FHA loan, the question works a little differently. I'll walk through all of it.
I'm Duane Newberry with eXp Realty, and I help buyers in Brentwood, Antioch, and Oakley, CA, including a lot of first-time buyers and veterans. This is one of the questions I hear most when a buyer starts writing offers and feels pressure to "do whatever it takes." Here's what you need to know before you sign anything.
What is an appraisal contingency?
An appraisal contingency is a part of your purchase contract that protects you if the home appraises for less than the price you agreed to pay.
Here's why that matters. Your lender doesn't lend based on the price you offered. It lends based on the lower of the price or the appraised value. So if you offer $700,000 and the home appraises at $680,000, the lender sees a $680,000 house. The $20,000 gap has to come from somewhere.
With the contingency in place, a low appraisal gives you choices. You can ask the seller to lower the price, meet in the middle, cover the gap yourself, or cancel within the contingency period and keep your deposit.
Without the contingency, most of those choices go away.
What actually happens if you waive it and the appraisal comes in low?
If you waive the appraisal contingency and the home appraises low, you're generally still on the hook to buy at the agreed price. That leaves you with three paths:
- Pay the gap in cash. That's on top of your down payment and closing costs.
- Ask the seller to renegotiate anyway. They don't have to say yes.
- Walk away and risk your deposit. Backing out without a contingency to protect you can put your earnest money deposit at risk.
For a first-time buyer, the first path is usually the hard one. Most first-time buyers I work with have planned their cash carefully around a down payment and closing costs. A surprise $15,000 or $30,000 gap can wipe out the cushion they were counting on for moving, furniture, or the first repair.
Why buyers feel pressure to waive it
When a home gets more than one offer, sellers look at more than price. They look at how likely each offer is to close without a fight. A buyer who waives contingencies looks like less risk to the seller, so some buyers waive the appraisal contingency to stand out.
That pressure is real. But "everyone else is waiving" is not a reason, and it's often not even true. I'll never tell you there's a bidding war when there isn't one. My job is to tell you what's actually happening on the home you want, so you can decide with real information.
When waiving can make sense
Waiving the appraisal contingency can be a reasonable choice when all of these are true:
- You have the cash to cover a gap, separate from your down payment, closing costs, and emergency fund.
- You've looked at the recent sales and you're comfortable that your price is close to what similar homes have sold for.
- You plan to stay in the home a long time, so a short-term gap in value matters less to you.
- You want this specific home, and you'd still be glad you bought it even if it appraised lower.
If even one of these isn't true, I'd slow down and look at the options below first.
The middle ground: partial waivers and appraisal gap coverage
Waiving isn't all or nothing. Two common in-between options:
1. Cover a set amount, not an unlimited one. Instead of waiving completely, you agree in writing to cover a low appraisal up to a specific dollar amount. For example, you agree to cover a gap up to $10,000. If the appraisal comes in $8,000 low, you cover it. If it comes in $25,000 low, you still have room to renegotiate or cancel.
2. Use a higher deposit or a shorter timeline instead. Sometimes you can make an offer stronger without taking on the appraisal risk at all. A shorter contingency period or a larger deposit can show a seller you're serious. Each of these has its own tradeoffs, so we'd go over them together for the specific home.
The goal is simple: give the seller confidence without betting money you don't have.
How it works with a VA or FHA loan
If you're using a VA or FHA loan, the rules have an extra layer that protects you.
Both loan types use a document often called an amendatory clause, also called the escape clause. In plain terms, it says you can't be forced to complete the purchase or lose your deposit if the home appraises below the contract price. You can still choose to move forward and cover the gap in cash.
So for VA and FHA buyers, "waiving the appraisal contingency" may not work the way it does on a conventional loan. Because the clause is part of the loan, the protection stays with you.
What you can do is agree up front to cover some or all of a low appraisal with your own cash, if you have it. That can make a VA or FHA offer look stronger to a seller without giving up the protection itself. I cover the VA side of this in more detail in the next article, on what happens when a VA appraisal comes in low.
Step by step: deciding whether to waive
- Get fully pre-approved first. Ask your lender what happens to your loan if the appraisal comes in low on your specific loan type.
- Know your real cash number. Add up your down payment, closing costs, moving costs, and an emergency cushion. Whatever is left is the most you could cover in a gap. If that number is zero, you shouldn't waive.
- Look at the recent sales together. Before you write the offer, we look at what similar homes nearby have actually sold for. If your price is well above them, the appraisal risk is higher.
- Pick your protection level. Full contingency, capped gap coverage, or a full waiver. Choose the one that fits your cash, not the one that sounds most competitive.
- Get it in writing, exactly. The contract language matters. A vague promise to "cover the gap" can cost you far more than you meant to agree to.
- Track the deadline. If you keep the contingency, it has a deadline. If the appraisal isn't back in time, we talk about extending it before it runs out, not after.
Common mistakes first-time buyers make
- Waiving with money they don't have. This is the big one. If you can't cover a gap, waiving is a bet, not a strategy.
- Counting the down payment twice. The cash covering a gap is separate from the cash covering your down payment. You can't use the same dollars for both.
- Waiving because someone said "everyone is doing it." Ask what's actually happening on this house, with these sellers.
- Forgetting the deposit is at risk. Waiving the contingency can put your earnest money on the line if you need to back out.
- Not asking the lender first. Your lender can tell you exactly how a low appraisal affects your loan. Ask before you write the offer, not after the appraisal comes back.
- Assuming a waiver guarantees a win. It can help, but sellers weigh price, terms, timing, and financing together. A waiver alone doesn't win a house.
Why I walk first-time buyers through this before the offer
Most of the stress I see around appraisals comes from a buyer finding out what they agreed to after the fact. I'd rather you understand it before you sign.
When we write an offer together, we decide on the appraisal piece on purpose, with your real numbers in front of us. If the appraisal comes back low, you'll already know your options. And if there's an issue at any point, let me know right away so we can work together on a solution.
FAQ
What does it mean to waive the appraisal contingency? It means you give up the contract protection that lets you renegotiate or cancel, without risking your deposit, if the home appraises below your offer price.
Is waiving the appraisal contingency the same as skipping the appraisal? No. If you're getting a loan, the lender still orders an appraisal. Waiving the contingency only changes what happens to you if the value comes in low.
How common is a low appraisal? It depends on the home, the price, and how fast prices are moving. I'd rather look at the recent sales for the specific home than guess.
Can I waive part of the appraisal contingency? Often, yes. A common option is agreeing to cover a low appraisal up to a set dollar amount, with the contingency still protecting you beyond that amount. The contract wording matters, so it should be written carefully.
Can I waive the appraisal contingency on a VA loan? VA loans include an amendatory clause that protects you if the appraisal comes in low. You can choose to cover a gap in cash, but the clause generally keeps you from being forced to buy above the appraised value.
Does waiving the appraisal contingency make my offer better? It can make your offer look less risky to a seller. It's one factor, not a guarantee, and it only makes sense if you can cover a gap without hurting your finances.
What if the appraisal comes in high? Nothing changes in your contract. You pay the agreed price, and you start out with some value on paper above what you paid.
Who orders the appraisal? Your lender orders it, and you usually pay the appraisal fee as part of the loan process.
The bottom line
Waiving the appraisal contingency is a money decision, not a bravery test. If you have cash set aside to cover a gap and you'd be happy owning the home at your price, it can help an offer stand out. If you don't, a capped gap amount or other terms usually get you most of the benefit without putting your savings and deposit at risk. And if you're on a VA or FHA loan, you already have a protection built in.
I'm Duane Newberry with eXp Realty. If you're a first-time buyer or a veteran looking in Brentwood, Antioch, or Oakley and you want help deciding how to write your offer, call or text me at 925-890-3949. Let's get you home.
Related reading: What's the Difference Between a Home Inspection and a VA Appraisal?, Will Sellers Accept a VA Loan Offer in Brentwood, Antioch, or Oakley?, How Much House Can You Actually Afford in Brentwood, Antioch, or Oakley Right Now?
