NAR Report Shows Fewer Buyers Waiving Appraisal, Inspection Contract Contingencies

In a fast-selling market with limited inventory, buyers tested out new strategies to outbid other buyers, such as waiving inspection and appraisal contract contingencies, making higher down payments, and competing with all-cash offers, the National Association of Realtors reports. In recent months, however, NAR has reported a decline in the fraction of buyers who waived appraisal and inspection contract contingencies. 

Just 19% percent of buyers waived the inspection contract contingency in December 2021, down from a peak 27% in July, while 21% of buyers waived the appraisal contingency in December after a peak of 29% in June 2021. The recent decline may be a result of rising home prices as well as a faster in-person appraisal process as increasing vaccination rates cut down on appraisal delays.

According to NAR’s RCI December 2021 survey, about 5% of appraisals conducted were via a desktop/automated valuation process.3 Fannie Mae and Freddie Mac had used desktop underwriting prior to the pandemic. FHA also recently launched an automated underwriting system in October 2020.

The decline in buyers who are waiving appraisal and inspection contingencies is a healthy trend. Buyers should pay for what a home is worth and be informed of potential issues that need to be addressed by the seller or anticipated by the buyer if the buyer wants to take the responsibility for addressing this issue at their own cost.  If so, the buyer can negotiate for a lower price.

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