Profile picture for user4007032

Realtor told me bank may require full offer & I'd have to pay it out of pocket. Advice?

A realtor who has been working with REO's for 5 years with the same bank told me that she has seen the bank hold the buyer to the offer price. At that point, the buyer would have to come out of pocket to make up the difference between the agreed upon appraisal and the offer price. If not then I'd lose the $ I put down for escrow.I'm afraid of offering too much or the appraisal coming in to low. I don't want to have to put any more out of pocket than the down payment and closing costs. Any suggestions? Thank you! 
  • November 03 2012 - US
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Answers (6)

Profile picture for wetdawgs
This trend is happening because of buyers bidding up prices so that they win the offer,  but when it appraised for lower than their offer they want to renegotiate.    I can see why the sellers would wish to do this.

  • November 04 2012
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Profile picture for Rita Walker
Your Realtor should have given you comps so that you could have made an informed decision, before you offered a price. Having said that, the price offered would have been comparable or less then what the appraisal price would be.

If in doubt, have that appraisal prior to inspection period ending.
  • November 04 2012
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This is actually a "new trend" where Bank addendums will have language that specifies that the buyer is responsible for the difference in appraised value--you are only held to that if you sign that though.  Some banks will not go into contract with you without it though, so it is a tough spot to be in for the competitive nature of many markets throughout the US.  My advice is that you offer what your Realtor believes the home will appraise for, and not more...I have seen many offers that were "sent right" for "less" than the highest go into escrow. 

Traditional purchase contract terms usually protects the buyers from overbidding via the appraisal contingency but this causes delays in the extremely "unorganized" world of REO sales...so they want to make sure that people are "standing" behind their offers to reduce the amount of time that gets wasted with "bad offers."

Best of luck from So-Cal and best wishes
  • November 04 2012
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I agree with Connie. Most offers to purchase say the appraisal must meet the offered price. If not then you or the seller can adjust the prices but you would get back the earnest money you put up. If that is not in there I agree it should be added. Hopefully you are using your own Realtor to guide you and NOT the one working with the bank as their agent.

Tim
  • November 04 2012
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Profile picture for Connie Klemme
you need to read the contract and see what it says about appraisal.   If there is no language in the offer paperwork that says house much appraise for sales price then you will want to make sure that is written into your offer terms. 

honestly...there may be banks that would hold someone accountable for that but I wouldn't let someone telling me that be the reason I didn't require in my offer that if the home does not appraise for purchase price that the contract is void or can be renegotiated or something like that.  Just because one has done it in the past doesn't mean that they won't deal with you with an offer that protects you from this problem.  If they wont' take your offer on those conditions then it's likely not the home to purchase unless you just feel you MUST have this home and are willing to risk paying the extra money.    this problem has come up in the past -even when the home was not an REO that is why in many states there is now standard language in the financing addendums that the home must appraise for X amount of money and what to do if it does not.


it's best to get those terms laid out up front as part of the contract.
REOs do use their own contracts but they also do agree to addedumns sometimes, they also sometimes agree to waive per deim fees and extend closings but listing agents seem to act like they don't.  I have never figured out if it is because listing agents want to keep that  REO company happy and so they don't ask or if they think they can't or what.  I've listed for REO companies and if they want to sell, they will negotiate details like this.

It simply doesn't make financial sense to pay too much for home in this economy and buying a house above it's appraised value is doing exactly that.
  • November 03 2012
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I wrote on your other thread. I am curious what bank it is? 

I would keep my earnest money to a minimum, just in case, especially since it seems to have little effect on acceptance of offers.

Another thing I would do, order that appraisal the moment you know you have a deal. You will likely have it back before your inspection contingency period is over, which will give you an additional out. 

Depending on the bank, you might consider closing with their title company. They often offer some significant savings, because they feel that it makes things go more smoothly. This savings could translate into money that will help you if you are required to bring more to the table in down above appraisal. 
  • November 03 2012
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