Appraisal contingencies are clauses that the buyer adds to the purchase contract to have a way out if the property doesn't meet their financial expectations.
This is done by hiring a professional who may thoroughly inspect the property and determine how much the market would value it depending on several aspects, such as the quality of its materials and the land's extension.
Then, a report must be sent to both parties, which is going to indicate the estimated property's appraisal. If the property's appraisal is lower than the buyer's offer, they have the legal right to refuse to continue with the purchase and get their earnest money back.
This is a fantastic option when buying properties that can easily change their price due to the market's volatility.
Nonetheless, some things can be done to avoid ending the transaction. The buyer could try to negotiate a lower price for the property or even some necessary upgrades that the inspector might have pointed out.
You can also try to get another opinion on the property's value. Still, this option is often not ideal, as inspectors tend to be expensive to hire, and you could exceed the time limit indicated in the contract.