The appraisal contingency protects you if the home appraises for less than your agreed price — giving you room to renegotiate, cover the gap, or walk while the contingency is still in place.
Why appraisals matter
When you finance a purchase, the lender will only lend against the property’s appraised value, not necessarily your contract price. If a home is under contract at $900,000 but appraises at $870,000, the lender bases the loan on $870,000. That $30,000 difference — the appraisal gap — has to come from somewhere, which is exactly what the appraisal contingency is designed to address.
A standalone contingency with a 17-day default
In the current C.A.R. RPA the appraisal contingency is separate from the loan contingency, with its own default removal period of 17 days after acceptance (confirm the current C.A.R. RPA). Removing the loan contingency does not automatically remove the appraisal contingency, and vice versa — they are tracked independently and each must be removed in writing.
Your options at a low appraisal
If the appraisal comes in low and the contingency is active, you generally have three choices: (1) Pay the difference — bring extra cash to cover the gap between price and appraised value; (2) Renegotiate — ask the seller to lower the price to the appraised value or meet somewhere in the middle; or (3) Cancel — if the appraisal contingency is still in place, the buyer may cancel because the property did not appraise at the agreed price, and is generally entitled to the deposit back.
The appraisal gap and gap coverage
In competitive markets, buyers sometimes waive the appraisal contingency or commit to an appraisal gap guarantee — a promise to cover up to a set dollar amount above the appraised value. This makes an offer stronger but shifts risk to the buyer: if you waive and the home appraises low, you’ve given up the right to renegotiate or walk on appraisal grounds, and your deposit is exposed. Run the numbers on how much cash you could actually bring before agreeing to a gap.
How it fits with the loan contingency
Appraisal and loan are related but distinct. A low appraisal can also affect loan approval, but the two contingencies protect different things and have different default timelines (appraisal 17 days; loan 21 days — verify the current C.A.R. RPA). Keep both in view, and don’t let removing one accidentally strip the protection of the other.
Disclaimer
Brian Cooper is a licensed California REALTOR® with eXp Realty — not an attorney. This page is general information about common California real-estate practice under the C.A.R. Residential Purchase Agreement (RPA); it is not legal advice and does not create an agent-client relationship. Contract defaults can be changed by negotiation, the C.A.R. forms are revised periodically, and your transaction may differ. Always confirm the current C.A.R. forms and the exact terms written into your contract, and for any dispute — especially over a deposit — consult a qualified California real estate attorney.
Frequently Asked Questions
What happens if the appraisal comes in low in California?
If the appraisal contingency is still active, the buyer can pay the difference, renegotiate the price, or cancel and generally recover the deposit. Which makes sense depends on your cash position and how much you want the home.
How long is the appraisal contingency in the C.A.R. RPA?
The default is 17 days after acceptance — verify the current C.A.R. RPA and the number written into your contract, as it can be negotiated.
Is the appraisal contingency the same as the loan contingency?
No. They are separate contingencies in the C.A.R. RPA with different default periods (appraisal 17 days, loan 21 days). Removing one does not remove the other.
What is an appraisal gap?
The difference between the contract price and a lower appraised value. The lender lends against the appraised value, so the buyer must cover the gap in cash or renegotiate.
Should I waive the appraisal contingency to win a bidding war?
Only if you can genuinely cover a possible gap in cash. Waiving removes your right to renegotiate or walk on appraisal grounds and puts your deposit at risk — weigh it carefully with your agent.
Can the seller refuse to lower the price after a low appraisal?
Yes. The seller can decline to renegotiate. Then it’s on the buyer to cover the gap or, if the contingency is active, to cancel.
