Appraisal Waivers: Your Secret Weapon for Landing a Home in Austin

Appraisal Waiver Austin Texas Buy Home

Tyler Shelton

November 14, 2021

Austin isn’t your typical city – and this is especially true in today’s real estate market. Year after year, Austin’s home demand exceeds supply, resulting in escalating home values well above the national average. When COVID-19 came to the scene, there were questions of how it would affect home pricing, but surprisingly the same trend lives on. After a dip in sales initially, the housing market in Austin rebounded strongly paired with supply chain issues and material shortages, resulted in high demand for homes. Current homes for sale in 2022 are running many times selling for above the asking price. Why is this? The answer is an old one: supply and demand. More sellers have taken houses and condominiums off the market due to fears of lower home values due to the pandemic and people are still moving to Austin every day. Fewer listings have led to more demand for properties on the market. Rather than home values decreasing, homes for sale in Austin are maintaining the same increases as before the pandemic. With tech moving in at lighting speed, the demand will only grow higher. Landing a house or condominium in today’s competitive landscape is a challenge. For many buyers, purchasing a home in Austin now means navigating two issues: losing out on a home purchase due to a large discrepancy between the appraisal value and seller’s price, and ending up in a contract you can’t afford. But there are tricks that can keep you navigate both issues, and one of those tricks is an appraisal waiver. Let’s take a look at what an appraisal waiver is and how you can benefit.

What is an Appraisal Waiver?

Homes are most often obtained with cash or financing. Cash provides the seller with a quicker and less risky sale and may even avoid the need for an appraisal. But if you are financing, you can still make an offer with a similar risk profile as a cash buyer. How? By including an appraisal waiver in your offer package. When you finance a home, your lender is looking to reduce risk as much as possible. The better the lender does this, the more profit the lender makes. Following the appraisal value is a key way to reduce risk, giving your lender the clearest understanding of a home’s market value. But relying on appraisal values can create issues in Austin. If the appraised value is the benchmark for a loan, you and the seller may risk time and the loss of a home sale if the loan falls through due to the higher selling price. Thankfully here in Texas, the state promulgates home sales contracts that require financing, and these contracts include a third-party financing addendum with language that provides more ways to secure the home. You can use these addendums to your financial advantage, keep you in the running for a purchase, or both.

Types of Appraisal Waivers

Appraisal waivers come in three types, each designated by a box on the contract:

Box 1:

This option waives your right to back out of the purchase based on the appraised value. This is music to your seller’s ears, but you’ll have to pay more money out of pocket if the appraisal comes in too low. Let’s say a home is on the market for $400,000. You put $80,000 down with your lender to secure a $320,000 loan. Then let’s say the home appraises at $340,000 instead of $400,000 – a $60,000 difference. In this situation, your lender will lower the loan by that same $60,000 from $320,000 to $260,000. You would maintain your $80,000 down. To land the sale, you’ll need to come up with the extra money to meet the $400,000 price. This waiver definitely shows the seller you are serious and reduces the risk of the contract falling through, keeping you in the game. It is a gamble if you are tight on cash, so it’s good to weigh this option carefully.

Box 2:

This option is similar to the one above, but with a restriction based on the appraised value of the home. In this option, you define the limit you can afford. Using the example above, let’s say you can’t afford the extra $60,000 to meet the seller’s price, but you can afford an extra $30,000. If the seller wants $400,000, hitting that price would mean you would need an appraised dollar amount of $370,000 or more. You would still be supplying the down payment of $80,000. This option is saying you have the flexibility of adding in that $30,000 to hit that selling price while capping your risk at $30,000 if the appraisal comes in much lower. The seller risks the contract falling through if the appraisal is too low, but the seller may still honor this option to keep you ahead of other applicants because you are showing you are willing to meet the selling price out-of-pocket.

Box 3:

This option is an expanded version of Box 2. Like above, it gives you the right to terminate the contract if the appraisal falls below a price you can handle out of pocket, but it also allows you to cancel the contract if you can’t meet the underwriting requirements.  This agreement puts more of the approval process in your control. Perhaps you aren’t comfortable with the difference in the appraised value vs the selling price – perhaps even more concerned than your lender. This waiver gives you the option to still stop the contract in more than one way, such as if you don’t want to provide the full downpayment outlined in the examples above. This can be immensely helpful for you financially, but in reality, it isn’t particularly helpful in today’s Austin market since buyers don’t have the leverage to use this. Also, when you have two ways to end the contract, the seller benefits less. Still, you will appear more attractive to the seller vs a buyer who relies solely on the appraisal value.


In a typical sale, the home’s appraisal value is the critical negotiating tactic to protect against gouging, but the reality is it isn’t always the best method to land a home. Sometimes the value is simply what the market will bear, and this is especially the case in Austin. Home values are consistently above the national average even during the pandemic. Combined with higher demand due to the influx of tech, Austin property values will most likely go even higher. Everything is moving so fast that sellers can simply demand more. If you are looking to stay competitive here in Austin, particularly during the busy spring and summer seasons, an appraisal waiver is worth having in your back pocket. You can still minimize risk by setting an out-of-pocket dollar limit and pulling out if the downpayment remains too high. You can further minimize risk by analyzing the feedback you get from an experienced realtor or real estate agent, and this is where Smart Austin Realty can help. Our experienced realtors and helpful articles can help you better navigate buying homes for sale in Austin and keep you in the running in today’s competitive market.

Thinking about making a move in Austin? Contact us for a customized market valuation today.

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