A purchase contract in Virginia includes an appraisal contingency stating the property must appraise at or above the purchase price of $425,000. The property appraises at $405,000. The seller refuses to reduce the price. Which of the following best describes the buyer's options under the appraisal contingency?
Correct Answer
B) The buyer may terminate the contract and recover the earnest money, or negotiate a price reduction with the seller
An appraisal contingency protects the buyer when the property appraises below the purchase price. When the appraisal condition is not met (the property appraised at $405,000, below the $425,000 threshold), the buyer has the right to terminate the contract and recover the earnest money. Alternatively, the parties may negotiate a mutually acceptable price reduction, but neither outcome is automatic — the buyer chooses how to proceed.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
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