Contracts
What is an 'appraisal contingency' in a Delaware purchase contract and how does it protect the buyer?
AA contingency allowing the buyer to order multiple appraisals
BA contingency allowing the buyer to terminate or renegotiate if the property appraises below the purchase price — protecting the buyer from overpaying and the lender from lending above market value✓ Correct
CA contingency protecting the seller if the appraisal comes in above the purchase price
DA contingency requiring the seller to pay for the appraisal
Explanation
An appraisal contingency protects the buyer if the property appraises below the purchase price. Options upon low appraisal: (1) seller reduces price to appraised value; (2) buyer pays the difference in cash (makes up the gap); (3) parties renegotiate; or (4) buyer terminates and receives earnest money back. Without this contingency, the buyer is committed to the purchase price regardless of the appraised value.
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