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We put an offer on a new construction/spec home on November 10, 2010. We got approved for the loan and have been waiting on the builder to finish the house. The closing date was suppose to be on 1/31/11, however the builder is not anywhere near being done.
Our mortgage company ordered an appraisal and it came in 35k under the agreed on price. My husband and I are looking over the contract and confused on the wording....
..3. Rights of Buyer if Property does not appraise:
If any appraisal performed pursuant to and in accordance with this exhibit is for less than the purchase price of the Property, the Buyer shall have the right to request within 14 days of the binding Agreement Date…..
Is the "binding agreement date" the date we agreed on the contract? My agent never told us that we needed to have this done right away...I just assumed we would do it when the mortgage company needed it done.
Are we screwed? We don't have an extra $35k to put down on this house..and we can't walk away...we put $20k down in earnest money.
HELP....
A binding agreement date is the date that you signed the offer/contract.
If the house will not appraise for the purchase price, and your loan company will not loan the purchase price, then you cannot get financing. 99 percent of real estate contracts are contingent upon getting financing. Assuming that yours is, then the contract is cancelled and you are not obligated to complete the deal.
This is how things work in Missouri (if you have an offer contingent on financing). Your state may be different. Normally, you will not lose earnest money unless YOU do something on purpose that makes the deal fall through.
As the other poster mentioned, since a significant sum of money is at stake here, I'd consult an attorney to make certain.
We put an offer on a new construction/spec home on November 10, 2010. We got approved for the loan and have been waiting on the builder to finish the house. The closing date was suppose to be on 1/31/11, however the builder is not anywhere near being done.
Our mortgage company ordered an appraisal and it came in 35k under the agreed on price. My husband and I are looking over the contract and confused on the wording....
..3. Rights of Buyer if Property does not appraise:
If any appraisal performed pursuant to and in accordance with this exhibit is for less than the purchase price of the Property, the Buyer shall have the right to request within 14 days of the binding Agreement Date…..
Is the "binding agreement date" the date we agreed on the contract? My agent never told us that we needed to have this done right away...I just assumed we would do it when the mortgage company needed it done.
Are we screwed? We don't have an extra $35k to put down on this house..and we can't walk away...we put $20k down in earnest money.
HELP....
How on earth do you appraise a house before it is completed? The finish work could be high-end materials (marble, granite, etc.) which would increase the value of the house enormously. Have you requested upgrades that were not in the original contract?
This whole thing is really not making a lot of sense to me. I really think that you need to talk to an attorney who will explain everything and make sure that you are not being taken for a ride by the contractor.
From what I take here... and I hope this is not another OP abandons the thread deal. The use of "spec" means the home is already standing to some extent? So if the house is well beyond being shelled and just getting finish work, couldn't you appraise it?
Either way, any respectable builder will tell you that design options will not appraise 1 for 1.
Appraisal aside, a CMA would give you a general idea of $/sqft at contract... I find it very hard to believe any buyer's agent would mess up so bad that less then 2 months later the home appraises for $35k less then a CMA.
Maybe this is a stupid question. How can a house be appraised before it is built?
This is done all the time. New construction typically requires TWO appraisals. The first is done based on the lot and plans a builder would give to the appraiser. The appraiser will determine an as-built value. This appraisal is typically the go/no-go for a building contract.
The second appraisal is done once the home is complete, to verify that the home was built according to plan (same number of SF, upgrades, etc). You're also at the mercy of the market, if the area values have declined during the months of construction.
We sold our house in GA, built and sold that house in FL (spouse was transferred) and now we're buidling again in GA. It's been crazy and you would think I woudl be pretty good at this by now, but this builder has thrown us for a loop.
I have a call into an attorney who specializes in contracts/real estate.
We spoke with the agent and he confirmed that there were 2 errors in the appraisal. They were missing 500sq ft in the basement and 900 sq ft of land. He said the comps he used were pathetic and our area has several sub divisions that he could of pulled from but didn't. Our agent "seems" to be working diligently to get it fixed.
Yes, this was a spec house that we came in at the end of the framing stage. We had a wall moved, added wiring, built in shelves and a few other things to somewhat customize the house. We did pull comps and we were close in our offer to what other homes were selling for, but our price did go up because of some of the extras that we had customized to fit our needs.
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