Profile picture for user375356

Can the seller back out of a deal with no explanation during the appraisal process?

Our appraisal came in 10k below the purchase price that we had agreed on. We asked seller if we could renegotiate based on the appraisal value, and right away they told us we had to put in an extra 5k or there's no deal. We never got any addendum to the contract to sign, and the listing agent went ahead and tried to cancel escrow before we could even tell the seller that we would just agree to pay the 5k. What can we do?
  • March 23 2012 - San Diego
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Answers (17)

Profile picture for Darcy.Logan
What an entertaining thread!  And rather embarrassing at the same time, for me as a realtors---although there is some solid advice mixed in here among some wierd replies.

To the OP, it sounds like the sellers just wanted to split the difference with you for the shortfall on the appraisal.  I don't understand why the listing agent would attempt to cancel escrow immediately.  Please tell us that you do have a BUYERS AGENT representing you. 

In any event, let us know what happens and good luck!
  • March 25 2012
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Profile picture for SoCal Engr
"If you offered to pay $400,000 for a property that appraised at $390,000, you are offering $10,000 over the market value of the property and if on top of that you are willing to add $5000, that in my book is an offer of $15,000 over the market value of a property."

Okay, forget "basic math". Let's try "common sense".

Buyer offers $400K. Appraisal comes in at $390K. Seller then asks buyer to go to $405K? In what world does this make any sense?

In the original post, buyer went back to seller to renegotiate price after appraisal. "Common sense" says the "extra $5K" is over the appraised price, not the original offer.

Please, a good portion of your profession is all about contracts and fine print.
  • March 25 2012
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Make certain you communicate with the seller exactly what they mean by "put in an extra 5k" just as below there are a few ways that can be understood. To me the way it sounds here is that the seller is willing to sell you the property for 5K more than the app value. If that is true and If you are willing to pay the extra 5K and do not want to cancel then don't sign the cancelation inst and instruct escrow to send both you and the seller an addendum changing the purchase price to the new one the seller and you agree on. Make certain your lender (underwritter) has no issue with this. Must be a special place if you are willing to pay more in this troubled market. Personally I would walk away.

Do you know seller motivation for selling? how long on the market? Other offers, etc... .Doubtful that the home's value will be going up significantly enough in the near future to offset the seller's time and cost of finding a new buyer. Additionally I would not have broadcast to the whole world that I was willing to pay more.

Lastly I agree with Marcie below concerning the cancelation move by the listing agent. The only other possibility that comes to mind is if the seller actually has another offer for more money, possibly cash, etc... Ask your agent to inquire.

The seller does not have to negociate to a lower price ( unless you built that into the RPA). If you are willing to pay the differnce, the 10K, and can still close the loan, etc... the seller has no grounds for cancelation. Push the escrow closed. Remove contingencies, fund escrow and make demand to close escrow. 

  • March 24 2012
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Make certain you communicate with the seller exactly what they mean by "put in an extra 5k" just as below there are a few ways that can be understood. To me the way it sounds hear is that the seller is willing to sell you the property fopr 5K more than the app value.  If that is true and If you are willing to pay the extra 5K and do not want to cancel then don't sign the cancelation inst and instruct escrow to send both an addendum changing the purchase price to the new one the seller and you agree on.  Make certain your lender (underwritter) has no issue with this.  Must be a special place if you are willing to pay more in this troubled market. Personally I would walk away.


  • March 24 2012
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Profile picture for Ofe Polack
If you offered to pay $400,000 for a property that appraised at $390,000, you are offering $10,000 over the market value of the property and if on top of that you are willing to add $5000, that in my book is an offer of $15,000 over the market value of a property. 
  • March 24 2012
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wow, several of the Realtors on here apparently can't read, or do simple math... 

Short answer: NO, the seller can't cancel on the appraisal in any way shape or from. The buyer can, but you would only have a short period of time after the appraisal came in low to exercise that contingency. Thus, you (your agent actually) need to prepare an addendum in writing and send it to the seller immediately, that you are willing to pay $5000 more out of pocket. 

To the agents bad at math: If the contract is $400,000, the appraisal came in at $390,000 and he agrees to pay $5000 more, that would be a sales price of $395,000.... Not sure how your arithmetic gets you to "15,000 under water"  

  • March 23 2012
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Profile picture for hpvanc
Wow, I hope your agent is better with math than a couple of the Realtors® on this thread.
  • March 23 2012
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Profile picture for Ofe Polack
Wow!  Life is full of surprises, why would anybody insist on paying more that the appraised value of a property?  The lender is only going to give you the appraised value, so you mean to tell me that you are willing to start life in a new home $15,000 "underwater"?  Rethink what you want to do please, before it is too late.  The best of luck!
  • March 23 2012
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Profile picture for SoCal Engr
@ Realtors...

Please, please, please. Read and comprehend the post before you put fingers to keyboard - especially if you're going to yell.

#1 - Appraisal came in $10K below contracted price.
#2 - Buyer asked about re-opening negotiation on price.
#3 - Seller demanded buyer come in with $5K to cover half the delta.

So, if the buyer agrees, they'd be $5K in-the-red, not $15K. Not paying attention to these types of details, especially in a public forum, makes you look bad.
  • March 23 2012
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Profile picture for Nihan Bol
Escrow can only be cancelled after both parties, buyer and seller, submit their cancellation addendum to the escrow. If you have not signed the cancellation you are still in escrow. At this point if you still want to house consult a real estate lawyer.
  • March 23 2012
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IF THE APPRAISAL IS 10K BELOW THE PURCHASE PRICE, THE LENDER IS GOING TO BASE LOAN  AMOUNT OFF THE APPRAISED VALUE, NOT THE PURCHASE PRICE.  (YOUR LOAN AMOUNT WILL BE SMALLER)  

YOU ARE ALREADY 10K BELOW VALUE, GIVING UP 5K MORE MAKES YOU 15K OVER. PLUS YOU HAVE TO BRING MORE $$ TO THE TABLE TO MAKE UP FOR YOUR NEW SMALLER LOAN AMOUNT. 

 IF I WERE YOU, I WOULD TELL THE SELLER TO DROP THE PRICE TO THE APPRAISED VALUE, OR WALK. YOU WILL BE 15K UNDER WATER BEFORE YOU EVEN MOVE IN.
  • March 23 2012
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Profile picture for SoCal Engr
Ok, I am not understanding the mechanics of this.

Both sides sign an agreement, subject to an appraisal contingency. However, my understanding has always been that this is a contingency for the buyer (i.e., to allow them to rescind their offer if the house appraises for less than the agreed-upon price).

Once the house appraised lower than sale price, it seems one of four things can happen...

#1 - The potential buyer can rescind their offer based on the failure to meet the appraisal contingency.

#2 - The potential buyer can decide to make up the difference out-of-pocket, and the transaction moves forward.

#3 - The potential buyer can submit a revised offer (i.e., rescind and re-submit) based on the appraisal results.

#4 - The seller could take the initiative and make a demand for performance (i.e., force the potential buyer to lift the contingencies or have the contract rescinded). However, my understanding is that this involves a time window for lifting of contingencies (72 hours?).

From the OP's post, none of these has actually happened. There was a verbal discussion about renegotiating the price, but no indication that a revised offer was submitted.

While I question why anyone would want to start in a negative-equity position, the mechanics of this situation just don't sound right.

p.s. @ OP...What part of San Diego? I still question starting off $5K in-the-hole, but San Diego is a very diverse market. Some areas might be worth it, others.... 
  • March 23 2012
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Profile picture for Connie Klemme
agree that your agent needs to be contacting the seller's agent to keep it going.  Especailly if you are willing to make up some of the difference, they need to be getting on the ball with that and contacting the list agent to get it in writing and hold it together.
if you agent's not doing that your recourse is to contact the agent's broker.
  • March 23 2012
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Unfortunately, Yes. Re-read your contract and consult a real estate attorney if necessary. Very sorry for this situation.
  • March 23 2012
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This sounds like a bad situation. Re-read your Ca Purchase Agreement. Check page 2 paragraph 3-i. The appraisal must not be lower than the purchase price and page 5 paragraph 14 a-f. As long as you are within your contingency period and they have not given you a notice to perform the seller should not be able to breach contract. Although I do not have the terms of your contract so it is best to consult your agent, if he can not answer your question you should contact some one who can.
  • March 23 2012
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Where is your Agent in this process?

If you have decided to pay an extra 5K out of pocket your agent should be communicating that to the Listing Agent in the form of an addendum if one has not been sent to you. (It can be written up by either agent). It sounds like a communcation break down. Ask your agent to resolve this quickly and connect with the Broker if the Listing Agent is not responding.

It could also be a strong arm technique to get you to panic in order to pay the extra $5000.00. Unless there are more details that you are not explaining, this should be simple to resolve.

Additionally If the seller cancels (w/ any contract penalties and you would have to sign the Cancellation of Contract), they now know what their property is worth and may not be able to get a better price with a new offer and starting the process all over again. I doubt they really want to cancel.  
  • March 23 2012
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Profile picture for wetdawgs
If you had an appraisal contingency and the appraisal came in lower than the offer price, the seller does not have to negotiate.

  • March 23 2012
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