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Need help! Buying a short sale property - signed contract. The appraisal came in 35k shorter than the buying amount! On appraisal the sq footage listed is 14% less than the county and what was advertised by the seller's (banks') agent. Sq footage was important in determining the bidding price, since the house was thought to be larger than majority of the ones we saw in the nighbourhood. And, price per sq foot seemed like a good deal.
Put in hefty earnest money. What can we do? Can we re-negotiate?
Have read different forum threads about similar situations, but did not see as huge of a discrepancy as in our case. Thanks for all your help
Depends on what your contract sales about appraisal results. Does yours have an appraisal contingency? For example, AZ standard Realtor contract allows buyer 5 days from notice of appraisal less than offer price to cancel contract and get earnest money back. Typically the buyer and seller will try to re-negotiate.
Also since you are buying a short sale, has the bank already accepted the contract? Again, many short sale contracts include an addendum that allows buyer to cancel prior to bank acceptance. Getting an appraisal suggests that you have bank acceptance and are now trying to finalize the loan for closing the sale.
What does your Realtor say about the situation? Or did you not have representation?
We had a similar issue where the appraisal came in 20% lower than the price we had agreed. Would suggest the following:
1. If you have an appraisal clause in your contract, suggest that you use it to get out and/or renegotiate. Remember, you will face the same situation when you sell the house - you don't want to be caught paying a price that cannot be justified to the market
2. If you don't have an appraisal clause, use your lender. Most likely, your lender will be unwilling to lend you the amount that you had originally requested since the appraisal is different. They can provide you with a letter saying that they will deny the loan - you can use that to get out of the contract.
Remember, this is a good thing for you - not a bad one. PM me if you want more information.
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