You need to read the contract. It states how the earnest money is handled with a busted contract. The standard real estate used by agents almost always has a clause about appraisal.
You do not have to sell for this price. You can ask for buyer to pay the difference at closing but you can’t force them to.
Appraisals are someones educated guess. Another appraiser might appraise the property for more. If the market is that hot you can ask that the next offer taken is guarrnteed x number of dollar$ above appraisal or guarranteed reguardless of appraisal.
As for this contract if buyer won’t pay your price it is a deal deal give the money back and move on.
I sold my property a month ago and our closing was supposed to be tomorrow (9/7). We got word from the lender’s appraisal on Friday (5 days before closing) that our property did not appraise the sale price. The buyer and myself agreed on a $156,900 price of the home several weeks ago. We signed the contracts, set closing, earnest money given, etc.
Now, 5 days before closing, they want me to sell at appraised value ($149,000) or else deal is off. I am standing firm so as it stands, closing is a no-go.
My questions are
Am i entitled to earnest money? My realtor told me since it did not appraise, buyer keeps it. But now, I’m looking at about a month’s worth of lost potential buyers - who pays for that?
I do not know what to do. My realtor is telling me I can never sell the house for more than $149k. I think the appraisal came in low but how do I protect myself against lender’s giving low appraisals for my property. (to add to that, my neighbor which has the same excat house had theirs independely appraised for $155k. The last house in my condo community sold for $147 but that was a year ago and I live in a “hot” part of town where real estate prices are and have been drastically going up.
Your real estate sales contract has an appraisal contingency in there. There are a number of hot markets (DC and San Francisco are two I am very familiar with) where striking the contingency clause is fairly common, if risky, for the buyers. If that clause is stricken, then you should be entitled to the earnest money.
If you are in a less-frantic market, the appraisal clause probably lets them wiggle out of the contract, but even still there may be a time limit attached to the appraisal contingency (again, have to look at the sales contract).
If an appraisal comes in low, the deal isn’t necessarily sunk; you can request the lender do a second appraisal and provide them with some comps. If your neighbor DID sell at a higher price and has an appraisal, find out what bank did it. Also, you have to be honest with what your property offers and factor that in, e.g. if he had a pool but you don’t have one, that might be why his appraised higher, etc.
Neither your realtor, nor you, set the high limit for how much you can sell your property–that is a decision that can ONLY be made by a buyer. You do not dictate market prices to the buyer; they are the ones making the purchase decision. Sometimes people connect with a property for wierd reasons and are willing to pay more than what most would consider “market price”. The flip side is: if you are pricing your property at the absolute limit that produces only a single interested buyer, you are doing a disservice. Setting a lower price and attracting more buyers will produce those who can afford to pay what they sign up for. Maybe lowering the price would produce someone with actual cash to buy, who then isn’t locked in to a bank’s appraisal. There’s more to pricing than just a dollar amount. Consider the strength of the deal, likelihood to be paid on time, likelihood for problems, and the intangibles. Don’t get greedy.
Re: appraisal and ernest money - Posted by Natalie-VA
Posted by Natalie-VA on September 13, 2005 at 14:32:43:
Raimund,
You usually are not entitled to the earnest money if the property does not appraise. Refer to your contract. The expenses you lost for that month will be paid by you.
As far as the Realtor telling you that you can’t sell the house for more than 149k…that’s not true. What kind of appraisal was it? Conventional? VA? FHA? I’ve heard that FHA and VA appraisals stick with the property for six months, but conventionals do not.
When there are no recent sales in your community for the appraiser to use, he must look in a nearby community that is similar to yours. You and your agent should do the same research to see if you can find him better comps. Also, find out from your neighbor the name of the appraiser that did theirs and see if the buyer’s lender will accept another appraisal from that person.
Re: appraisal and ernest money - Posted by River City
Posted by River City on September 10, 2005 at 19:46:23:
Most contracts do have a clause that says the property must appraise for at least the sales price or the sales price will be renegotiated. Ask yourself one question. Would you pay $155,000 for a home that is only worth $149,000?
You could ask your realtor if he/she has any better comparables than those used by the appraiser. If the realtor can find some that are acceptable with the lender, then the appraiser can adjust the value upward. When you set the sales price on the home, the realtor should have been aware of the prices of recent sales in your area that would have substantiated the asking price.