Loan vs. Appraisal Contingencies—What Changed in the 2026 OREF Forms?

Q:  I’d appreciate some additional information on the appraisal contingency now being separated from the loan contingency in OREF 001 – Residential Real Estate Sale Agreement.  The loan contingency still includes a requirement that the property qualify for the loan.  Qualifying, to me, means final underwriting approval from the lender, which typically requires an appraisal.  Can you please clarify the intent?  If the buyer didn’t include an appraisal contingency, can the lender still have an appraisal done as part of the loan process?  What if the property doesn’t appraise, but there was no appraisal contingency?

A: While the two contingencies were separated in the 2026 OREF Sale Agreement, the Loan Contingency still requires that both the buyer and the property qualify for the loan. This qualification may involve an appraisal, but it is not limited to appraised value. A property may fail to qualify for a loan for other reasons, such as condition, zoning, or loan program requirements. The key distinction is that the Loan Contingency does not require the property to appraise at or above the purchase price, while the Appraisal Contingency does.

Can a lender still require an appraisal if no Appraisal Contingency is included?

Yes. A lender may still require an appraisal as part of the loan approval process, even if the buyer has not included an Appraisal Contingency in the Sale Agreement. The lender’s underwriting requirements operate independently from the contractual contingencies selected by the buyer.

What happens if the property does not appraise and no Appraisal Contingency was included?

The outcome depends on the lender’s response. If the lender denies the loan based on the appraisal, the Loan Contingency would fail, and the buyer would be entitled to a refund of their earnest money deposit. However, if the property appraises below the purchase price or includes conditions, but the lender is still willing to fund the loan, the Loan Contingency is satisfied, and the buyer would not have a contractual basis to terminate based solely on value.

Summary: If a buyer wants the transaction to proceed only if the property appraises for at least the purchase price, they should include an Appraisal Contingency in addition to the Loan Contingency.

All comments and responses from OREF or its staff, managers, and volunteers are non-legal opinions made for general purposes. Each Forms subscriber must rely solely upon their Principal broker or personal legal counsel for specific advice and instruction. You and your client should independently confirm that the Form(s) you use are legally suitable for the purposes intended and that they are current with respect to all laws and regulations.