Profile picture for user3824919

We are in the process of purchasing our first home in which seller accepted our offer of $5000 less

Seller changed the contract and added this "Buyer shall pay up to $7000 over the appraised value of the property not to exceed the purchase price"..
 

  • April 20 2012 - Staten Island
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Answers (6)

Profile picture for Jim Dawson
Hello   In my neck of the woods  Temecula/Murrieta California  we see this as a common contract…mostly from flip homes..Our market is very fast paced…homes are selling very quickly at list or above with multiple offers on every house that's Standard or Bank Owned.

Appraisals are not current with the rise in prices, and cash offers are very common above asking. All real estate is local… so if you are in a market like that…you risk losing the house and others too if you don't agree.

Also if it came in really low   you could end up paying less than expected.  I have seen this happen as well.

  Prices are low now and interest rates are too,  I believe you will look back and see this as very little jeopardy on your part.     Good Luck!  Jim

  • April 25 2012
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Profile picture for Cindy Quinton
I hope you will update us on the decision you made.

Honestly, I see both sides of this. For instance if one is the buyer, it seems on the surface that there is no legitimate reason to pay MORE than the home appraises for. I mean really, in this economy who wants to be underwater on day one? Some markets have improved drastically, but not many to the point where people are agreeing to over market prices.

But then again, from the seller's perspective, why should they have to absorb someone else's buying costs? In most instances they had to pay their own closing costs when they bought. Now they are being asked to eat those expenses again when selling.
  • April 25 2012
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Profile picture for sunnyview
I think that you need to pull back and ask for clarification before you sign something that you don't completely understand. Most contracts in my area have an appraisal/financing clause that says that if the property does not appraise then the buyer can cancel the transaction and get their deposit back.

Most lenders will only write a mortgage up to the appraised amount so if the house does not appraise you might have to take money out of your pocket to close. Ask for clarification and make sure you understand what the contract says.
  • April 20 2012
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When dealing with contracts, in order to be enforcable, you have to agree to the terms first. (If you don't sign off on the specific terms, you can't be forced into something you didn't agree to)

Based on what you're saying, the seller is expecting the appraisal value to be lower than your agreed price. Normally when an appraisal comes in low you have a few options. In Virginia where I work the sales price of the home becomes negotiable in the event of a low appraisal. The buyer and seller can negotiate to drop the sales price to match the appraised price OR agree to any other scenario where the buyer 1) pays the full contract price regardless of the appraisal, 2) pays more than the appraised price but less than the orignal contract price, 3) changes the amounts of any closing cost credits to lessen the impact on the seller, or 4) everyone decides not to go through with the sale.

The scenario that actually happens depends on the motivations of everyone involved. In my market area we've had a lot of low appraisals and we've seen nearly every scenario. It just depends on what works for you and who is more motivated to make the deal happen. Sometimes it's worth it, sometimes it's not.

Keep in mind, IF the appraisal is low AND you end up paying higher than the appraisal price THEN you might have to make a larger down payment, depending on the type of loan you're getting. 

7k can be negligible or a really huge problem, depends on your financial situation, how long you'll own the house, the impact to your lifestyle and commute, availabilty of other homes you might like, if the market is trending upward or downward, etc.

  • April 20 2012
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Definitely sit down with your Realtor and clarify just what the seller's intention was.  They might already have an appraisal that came in low. Since your lender won't lend more than the appraiser says the property is worth, I'm not sure why they think that you might be willing to.  It's hard for sellers to have to take less than they feel their property is worth, or what they've put into it, but that is the reality everyone is facing right now.
  • April 20 2012
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Profile picture for Connie Klemme
it sounds like the seller is expecting a low appraisal and they want to cover themselves.  So this means if you offered $100k and the appraisal comes in at $90k you still have a contract to buy it for $97k

at least that is how I understand what you are saying, I would review carefully with your agent if you have one, visit with your lender about whether or not they will even loan for this and if you can do this, how much out of pocket you'd have to bring to closing and then sit down and ask yourself if you want to buy a house that appraises up to $7000 less than what you paid for it on day one.  Probably talk it over with parents or someone that you look to for financial advice.

No advice here...just some suggestions of what you might consider.
  • April 20 2012
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