Making an offer

Appraisal and inspection contingencies, explained

Educational guide · Updated 2026

Contingencies are conditions in your offer that let you back out — and get your earnest money back — if something specific goes wrong. Two of the most important protect against the home being overpriced or in worse condition than it looked. Understanding them matters, because waiving them is increasingly common in competitive markets and carries real risk.

How it plays out

You offer $420,000 on a home. The appraisal comes in at $405,000. Without an appraisal contingency, you're contractually obligated to proceed — and must either pay the $15,000 gap in cash or renegotiate. With the contingency, you can renegotiate the price, walk away, or split the gap with the seller.

The inspection contingency

This gives you a window after your offer is accepted to have the home professionally inspected. If the inspection turns up problems, you can negotiate repairs or a credit, ask the seller to fix things, or — if the issues are serious enough — walk away with your deposit intact. The inspection is for you: it's how you learn what you're actually buying before it's too late to change your mind.

The appraisal contingency

Your lender orders an appraisal to confirm the home is worth what you're paying, since the loan is secured by the property. If the appraisal comes in below your offer price, the appraisal contingency protects you — you can renegotiate the price, make up the difference in cash, or back out. Without it, a low appraisal can leave you on the hook to cover the gap or lose your deposit.

The risk of waiving them

In hot markets, buyers sometimes waive these contingencies to make their offers more attractive. It can work — but it removes your safety net. Waive the inspection and you could inherit expensive hidden problems. Waive the appraisal and you could be forced to cover a shortfall in cash or forfeit your earnest money. These aren't formalities; they're the protections that keep a bad surprise from becoming a financial disaster.

How to think about it

Whether to keep or waive a contingency is a real risk decision, not just a tactic to win a bid. If you're considering waiving one to compete, go in with eyes open about exactly what protection you're giving up — and lean on your agent to weigh it against how badly you want the specific home and what you can afford if the risk plays out.

Frequently asked questions

Should I ever waive contingencies?

Only in competitive markets and only if you understand and accept the risk. Waiving an inspection contingency means buying as-is. Waiving an appraisal contingency means you'll cover any gap between the appraised value and purchase price in cash.

What's the difference between an inspection and an appraisal?

An inspection evaluates the physical condition of the home for the buyer. An appraisal evaluates market value for the lender. They're done by different people and serve different purposes.

Can a seller refuse to allow an inspection?

Yes, but it's a red flag. A seller refusing inspection is usually hiding known issues. Proceed with extreme caution.

This article is educational and general in nature. Terms, costs, and rules vary by lender, provider, state, and your individual situation. Confirm details with a licensed professional.