Buyer expects low appraisal, and agent’s ‘just use financing’ advice raises red flags

A prospective homebuyer said they were preparing to bid on a house they already expected would appraise below the offer price. At the same time, their agent told them a separate appraisal contingency was unnecessary.

The discussion on the r/RealEstateAdvice subreddit indicated that this was far from a cut-and-dried issue.

Here’s what to know

A buyer in a Reddit thread said they were preparing to bid on a home they already suspected would come in under the offer price. Their concern was whether leaving out an appraisal contingency could put them in a position where they had to cover the shortfall themselves to keep the purchase together.

According to the post, their agent advised that a separate appraisal contingency was unnecessary because those clauses “aren’t common” in their state. Instead, the agent told the buyer that “if the appraisal is low we can simply use the financing contingency to get out of the deal since the lender won’t give me a mortgage.”

That logic didn’t land well with everyone in the thread. Some commenters said that is precisely when an appraisal contingency matters.

“That IS what they are for, and they’re not difficult or complicated to add to an offer,” one wrote. “I would let your realtor know that it’s non-negotiable. They’re either unfamiliar or are afraid it’ll make your offer look less competitive.”

Others took the view that the financing contingency may already do much of the work.

One commenter put it this way: “If the bank won’t lend the money then you can’t get the loan. The seller either lowers the price or you pay more out of pocket or the transaction terminates.”

More background

As the discussion continued, the buyer said the agent kept brushing aside the risk. The poster wrote that the agent insisted “there’s plenty of ways to get out of the contract if necessary” and would “keep saying we can just get them extended if necessary” when deadlines approached.

That response raised alarms for some readers.

“Sounds like they want to misuse other parts of the contract outside of good faith,” a commenter suggested.

Several replies focused on the fact that the answer may depend less on general principles than on the exact deal terms.

In some situations, a low appraisal means the financing falls apart. In others, the loan may still be available, but the buyer has to bring in much more cash. The paperwork itself seemed to add to the confusion.

What can be done?

The recurring advice was to pin down the risk in writing before signing, not to rely on broad promises that another clause will probably provide an escape hatch later. Since the buyer already expects the appraisal to come in low, commenters said the contract should address that possibility directly.

A commenter urged the buyer to make sure they “fully understand what happens if the appraisal comes in low before waiving that contingency.”

Even commenters who believed the buyer might still be able to walk away noted that doing so could still cost real money, including inspection expenses and nonrefundable lender charges such as the appraisal fee.

“I would strongly suggest not manufacturing contingencies later to force an exit,” a commenter said. “Write your contract properly now.”

Where can I learn more?

Appraisal surprises are just one way a deal can get more expensive than expected.

• In Nashville, a buyer was warned off after an absurd HOA policy surfaced under contract.

• Across the US, insurance costs are squeezing would-be buyers before mortgage math even settles.

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