This clause gives the buyer the right to withdraw from the transaction without payment of damages actually, an appraisal contingency protects the buyer and helps ensure a property is valued at a minimum, specified amount. If the price of the house is less than the contract price, the buyer can accept the same amount in the contract to buy the house, or ask the seller to change the price, or terminate the transaction without paying damages.

When a homebuyer (or their lender) has an appraisal, they hire a licensed professional to examine the property and evaluate it in light of recent sales of comparable properties in the same area. The appraiser then issues a report of their findings to the buyer and their lender. A home appraisal assigns an objective value to a property that’s being purchased. This is significant because most lenders aren’t allowed to lend more against a property than it’s worth.

The contingency specifies a release date on or before which the buyer must notify the seller of any issues with the appraisal. Otherwise, the contingency will be deemed satisfied, and the buyer will not be able to back out of the transaction.