An appraisal contingency is a clause in a home purchase contract that gives the buyer the right to renegotiate or walk away from the deal if the home's appraised value comes in lower than the agreed purchase price. Because lenders will only finance up to the appraised value of a home, a low appraisal means the buyer would need to cover the gap in cash or renegotiate the price with the seller. With an appraisal contingency in place, the buyer can request a price reduction, dispute the appraisal, or exit the contract without losing their earnest money deposit. In hot real estate markets, some buyers waive this contingency to make their offers more competitive, but doing so carries significant financial risk. Understanding appraisal contingencies is a key part of navigating any home purchase.