Most home buyers and sellers assume that the appraisal is a part of every real estate transaction. The buyer is obtaining a mortgage loan, and the lender requires an appraisal, the the appraisal contingency being a part of the contract is a given. In most cases, that is a correct assumption.

But what about when there is no lender, no mortgage loan? What about when the buyer is paying all cash?

Similar to a contract that includes a financing contingency exhibit (for a purchaser who is obtaining a mortgage loan), contracts that involve a buyer who is paying for a home in all cash will have an All-Cash Sale Exhibit. This exhibit discloses to the seller that the buyer is paying all cash and outlines the timeline for the buyer to provide the seller with proof of those funds. It also includes an option for the buyer to include an appraisal contingency as part of the terms of the cash offer.

Why might a cash buyer not include an appraisal contingency?

One of the main reasons that a seller may find a cash buyer more attractive than a buyer applying for a mortgage is the absence of a financing contingency. One less contingency in the contract gives the seller peace of mind and removes some of the uncertainty of the contract period. Oftentimes, to make the offer even more attractive, the buyer may opt to also make the offer without including the appraisal contingency. The removal of one or both of these contingencies may be worth something, monetarily, to the seller, meaning the seller might be willing to negotiate a slightly lower price for this buyer than for a buyer obtaining who needs to get mortgage loan approval.

There are a number of reasons that a cash buyer might choose, strategically, to leave out the appraisal contingency. a few of these might be:

  • The cash buyer is purchasing a property in a fast-moving, low-inventory Seller’s Market (i.e., a market in which the seller may typically have the “upper-hand” in negotiations) and wishes to set their bid apart from others
  • The cash buyer is making a bid on a property in multiple offers and is looking for ways to “sweeten the deal” and to make their offer stand out to the seller
  • The seller has a recent pre-listing appraisal they are willing to share with the cash buyer, and after reviewing that appraisal with their REALTOR®, the cash buyer determines it is sufficient as an indicator of value
  • The cash buyer and their REALTOR® review the comparable sales in the neighborhood and determine that the asking/list price for the property is appropriate
  • The cash buyer is looking to close fairly quickly and doesn’t want to wait to schedule an appraisal and for the report to come in

In short, a savvy, educated cash buyer, in conjunction and conversation with their REALTOR® may make a strategic decision to remove the appraisal contingency from the deal, in order to make their offer stand out from the crowd and be more likely to be accepted or more likely to get other terms that are attractive to the buyer into the contract.

When might a cash buyer opt to include an appraisal contingency?

While an all-cash exhibit with no appraisal contingency is certainly more attractive to the seller, there may be circumstances when a buyer might opt to include an appraisal contingency. A few scenarios in which a cash buyer might opt to include an appraisal contingency with their offer might be:

  • The property has been on the market for longer than the average days on market and has had several price reductions, giving the appearance that the pricing may be off
  • The property is a unique property with not very many similar properties with which to compare its value
  • There are few (or no) comparable sales with which to compare the property in a CM (Comparative Market Analysis)
  • The cash buyer’s offer is the only offer on the table and not in competition with other offers, meaning the appraisal contingency may be unlikely to be countered by the seller
  • The market is a buyer’s market (a market in which the buyer typically has the upper hand in the negotiation process)

Regardless of the circumstances, a cash buyer can be a more attractive opportunity to a seller, with or without an appraisal contingency in play, and every transaction is different with its own particular pros and cons. In every scenario, the cash buyer (and the seller) should rely on his or her REALTOR® to talk through the best strategy for their transaction and to give advice based on that buyer’s or seller’s real estate wants and needs.

Have more questions? Reach out to us anytime at 404-994-2181 or Ben(at)BuySellLiveAtlanta(dot).com

This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.