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Old 05-21-2018, 03:24 PM
 
10,274 posts, read 6,515,435 times
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Quote:
Originally Posted by BoBromhal View Post
I would hesitate to say most contracts have an appraisal clause/contingency. We're back to "in my market" or "in my state".

Asking price is 90K.
they've offered 100K, with an appraisal cap of $3K over appraised value.

IF the Seller accepts, and the house actually appraises for $95K somehow, then the sales price will be amended to $98K. If it appraises for $110K, the price is still just $100K.

And the Bank lends on the $95K, so they actually have to come up with a weeeee little bit more than the $3K extra.
I thought this was based on the seller's appraisal and not the banks. If the bank's appraisal comes in low that's a problem too, but a good way to let the buyer's appraiser that another one will be done in case they are planning something shady.
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Old 05-21-2018, 05:16 PM
 
Location: Salem, OR
13,749 posts, read 31,584,066 times
Reputation: 12119
Quote:
Originally Posted by BoBromhal View Post
I would hesitate to say most contracts have an appraisal clause/contingency. We're back to "in my market" or "in my state".

Asking price is 90K.
they've offered 100K, with an appraisal cap of $3K over appraised value.

IF the Seller accepts, and the house actually appraises for $95K somehow, then the sales price will be amended to $98K. If it appraises for $110K, the price is still just $100K.

And the Bank lends on the $95K, so they actually have to come up with a weeeee little bit more than the $3K extra.
Appraisals are required for financing so even if there isn't an explicit one written into a contract, it would impact financing. It's in there directly or indirectly via a financing clause. You can't force people to bring in cash they don't have.
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Old 05-21-2018, 09:06 PM
 
Location: Raleigh NC
7,781 posts, read 6,132,755 times
Reputation: 6905
there's not a financing contingency - in fact, a specific NON-contingency - "in my market".

There used to be, until about 5 years ago.

we do have due diligence, which generally runs 3 weeks so a Buyer can get an appraisal.

But "in my market", the Buyer has NO contingency in the standard contract. They're buying it as-is, and without loan contingency. They get a due diligence period to decide if condition and value match up to their willingness to buy the home.
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Old 05-22-2018, 11:10 AM
 
Location: Cary, NC
31,636 posts, read 55,374,605 times
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Quote:
Originally Posted by BoBromhal View Post
there's not a financing contingency - in fact, a specific NON-contingency - "in my market".

There used to be, until about 5 years ago.

we do have due diligence, which generally runs 3 weeks so a Buyer can get an appraisal.

But "in my market", the Buyer has NO contingency in the standard contract. They're buying it as-is, and without loan contingency. They get a due diligence period to decide if condition and value match up to their willingness to buy the home.
It's actually a wonderful system, and I commend NC REC, NC Bar Association, and NCAR for bringing it about.
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Old 05-22-2018, 11:38 AM
 
Location: Denver CO
19,047 posts, read 10,073,270 times
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Quote:
Originally Posted by BoBromhal View Post
there's not a financing contingency - in fact, a specific NON-contingency - "in my market".

There used to be, until about 5 years ago.

we do have due diligence, which generally runs 3 weeks so a Buyer can get an appraisal.

But "in my market", the Buyer has NO contingency in the standard contract. They're buying it as-is, and without loan contingency. They get a due diligence period to decide if condition and value match up to their willingness to buy the home.
Quote:
Originally Posted by MikeJaquish View Post
It's actually a wonderful system, and I commend NC REC, NC Bar Association, and NCAR for bringing it about.
What happens if the house doesn't appraise for the amount it needed to for the buyer to get the financing they need to afford the home? Do they have to just walk away and lose their earnest money?
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Old 05-22-2018, 11:50 AM
 
Location: North Idaho
21,014 posts, read 25,807,125 times
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Quote:
Originally Posted by Coldjensens View Post
My daughter is buying a house in Aurora CO (Denver). They made an offer for XX dollars or $3000 over appraisal. Lets say the offer is $100,000.

If the house appraises for $90,000, they buy it for $93,000. If it appraises for $190,000 they buy it for $100,000 (or $103,000 - that is not clear to me). I have not seen or heard of this process before, is this normal in a super hot market?
I sure hope the agent who wrote the offer did a better job of putting into words than you did. The way you wrote it, if it appraises for $190,000 they are locked in to pay $193,000.

I wouldn't accept it, but you never know, someone might get talked into it.
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Old 05-22-2018, 02:12 PM
 
Location: Raleigh NC
7,781 posts, read 6,132,755 times
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Quote:
Originally Posted by emm74 View Post
What happens if the house doesn't appraise for the amount it needed to for the buyer to get the financing they need to afford the home? Do they have to just walk away and lose their earnest money?
they lose their due diligence fee. we also have earnest money, but it's not "at peril" under the due diligence period is over. our due diligence periods are running <10 days on really hot properties with cash buyers, to as long as 30 days when non-conventional financing is involved. Of course, the seller has to agree to the period of time.

Buyers have to be prepared:

1. nothing requires the Seller to make any repair; but they (or the agent) would have to disclose defects going forward.
2. nothing requires the seller to come down on the contract price should it under-appraise; but they have a good idea the appraised value for any other offers that include financing.
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Old 05-22-2018, 02:21 PM
 
Location: Cary, NC
31,636 posts, read 55,374,605 times
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Quote:
Originally Posted by emm74 View Post
What happens if the house doesn't appraise for the amount it needed to for the buyer to get the financing they need to afford the home? Do they have to just walk away and lose their earnest money?
Buyer has the right to make up the difference, and the seller has the right to help or to decline.
Otherwise, what Bo said.

A good idea of valuation is something all buyers should have before proceeding.
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Old 05-22-2018, 02:35 PM
 
Location: Denver CO
19,047 posts, read 10,073,270 times
Reputation: 27862
Quote:
Originally Posted by BoBromhal View Post
they lose their due diligence fee. we also have earnest money, but it's not "at peril" under the due diligence period is over. our due diligence periods are running <10 days on really hot properties with cash buyers, to as long as 30 days when non-conventional financing is involved. Of course, the seller has to agree to the period of time.

Buyers have to be prepared:

1. nothing requires the Seller to make any repair; but they (or the agent) would have to disclose defects going forward.
2. nothing requires the seller to come down on the contract price should it under-appraise; but they have a good idea the appraised value for any other offers that include financing.
So what is a standard "due diligence fee"? That's not a fee in the jurisdictions I'm familiar with.

And yes, I understand what no contingencies means, I was just asking about the consequences of a house not appraising when a mortgage is involved. And in very few places (any?) is a seller obligated to come down on the contract price if the house doesn't appraise, that's not part of a standard financing contingency

Quote:
Originally Posted by MikeJaquish View Post
Buyer has the right to make up the difference, and the seller has the right to help or to decline.
Otherwise, what Bo said.

A good idea of valuation is something all buyers should have before proceeding.
Yes, of course prospective buyers should have "an idea" of the value. But obviously that's a subjective opinion and my idea of the value may not be the same as the mortgage lender's idea.
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Old 05-22-2018, 02:39 PM
 
Location: Cary, NC
31,636 posts, read 55,374,605 times
Reputation: 30188
Quote:
Originally Posted by emm74 View Post
So what is a standard "due diligence fee"? That's not a fee in the jurisdictions I'm familiar with.

And yes, I understand what no contingencies means, I was just asking about the consequences of a house not appraising when a mortgage is involved. And in very few places (any?) is a seller obligated to come down on the contract price if the house doesn't appraise, that's not part of a standard financing contingency
The DD Fee was originally intended to be the legendary "consideration in lieu of nothing," merely to avoid illusory contracts. It is a blank, i.e., negotiable field on our standard forms.
I.e., $10--$20. It was often $50--$100 until sellers got a lot more leverage.
Now? It is nuts. Thousands of dollars is not uncommon.
Under $1000? Must be a very minimal property.

You have to buy a contract to do an inspection here anymore. And, sellers get cranky because a three hour inspection finds stuff they have ignored for 20 years and hoped your inspector would miss, too...


Quote:
Originally Posted by emm74 View Post
Yes, of course prospective buyers should have "an idea" of the value. But obviously that's a subjective opinion and my idea of the value may not be the same as the mortgage lender's idea.
I mean a really really good idea.
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