Appraisal Contingency Addendum Template for England and Wales
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What is a Appraisal Contingency Addendum?
An Appraisal Contingency Addendum in England and Wales is a contractual clause that makes a property purchase conditional on an independent valuation meeting an agreed threshold. Under the Law of Property (Miscellaneous Provisions) Act 1989, such conditions must be included in the signed written contract. It protects buyers from being locked into a transaction where the lender's valuation creates a funding shortfall they cannot bridge.
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About the Appraisal Contingency Addendum
An Appraisal Contingency Addendum is a vital legal document that protects you as a buyer in real estate transactions by ensuring you're not legally bound to purchase property above its appraised market value. This addendum modifies your purchase agreement to include specific conditions based on a professional property appraisal, giving you legal recourse if the appraisal comes in lower than your agreed purchase price.
When do you need this document?
You need an Appraisal Contingency Addendum whenever you're financing a home purchase and want protection against overpaying. This is particularly crucial in competitive markets where bidding wars drive prices above market value, or when purchasing unique properties where comparable sales data is limited. The document becomes essential if you're concerned about market volatility or if local housing prices have risen rapidly. Most importantly, you'll need this addendum when your lender requires an appraisal but the purchase contract doesn't adequately address what happens if the appraisal falls short of the purchase price.
Key legal considerations
Your Appraisal Contingency Addendum must clearly define the appraisal process timeline, typically allowing 10-20 days for completion after contract execution. The document should specify who pays for the appraisal and what happens if the appraised value differs from the purchase price. Critical clauses include your right to terminate the contract, renegotiate the purchase price, or proceed with the transaction despite a low appraisal. You should also ensure the addendum addresses dispute resolution procedures if parties disagree on the appraisal's validity. The document must comply with your lender's requirements while protecting your interests as the buyer.
Legal requirements in United States
Under federal law, your Appraisal Contingency Addendum must comply with several key regulations. The Truth in Lending Act (TILA) requires lenders to provide specific disclosures about appraisal costs and their impact on loan terms. RESPA mandates transparency in appraisal fees and prohibits certain kickback arrangements between lenders and appraisers. The Dodd-Frank Act ensures appraiser independence, meaning your lender cannot improperly influence the appraisal outcome. Additionally, the Equal Credit Opportunity Act prohibits discrimination in appraisal practices. State laws may impose additional requirements regarding appraisal timelines, dispute procedures, and disclosure obligations, so your addendum must comply with both federal regulations and your specific state's real estate laws to be legally enforceable.
GOVERNING LAW
Applicable law
This Appraisal Contingency Addendum is drafted to comply with England and Wales law. Key legislation includes:
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