Plan A for contingencies: Lessons for buyers

REThink Real Estate

Q: I’m getting an FHA loan to finance my first home. I’m in contract right now. Our appraisal is done, and the house appraised for the sale price, but the loan process is not yet done, although I was preapproved. My agent says the lender has to review the appraisal.

I’m confused about the difference between the loan contingency and the appraisal contingency. My agent says I should remove the appraisal contingency, but I’m not sure about that.

A: In an FHA loan scenario on today’s market, the appraisal and loan contingencies are much more closely linked than in other situations and times. This is because FHA loans have a set of minimum standards for the condition of the homes being financed, much more so than with conventional (non-FHA) loans. An FHA appraiser is tasked with verifying that the property does meet these condition guidelines — or, if it doesn’t, calling out the deficiencies.