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FWIW, I don't think the square footage discrepancy means OP can cancel the contract. However, I do think that it affects the value and that it's reasonable to say that a seller/seller's agent knows this when being casual with the information. Therefore, if the OP pushes back on this issue, they may find the seller is more amenable to negotiation to get closer to that appraised value and amount the mortgage will be approved for.
I do agree that waiting a mortgage contingency is foolhardy unless you have the extra cash and are ok with making up the difference between sale price and mortgage appraisal. But I understand the OP's motivation in what is obviously a very competitive market.
Your last sentence brings up the main problem i.e. OP seems to be in an ultra-competitive market. In that instance, seller may be less amenable to negotiating as they may stand a good chance of securing another buyer quickly.
As to the sq footage, it doesn't really affect the value in a material way. The difference between offered price and appraisal was $19K; a difference of 400sf in no way accounts for that discrepancy. If anything, the difference should be even larger then! There have been very few court cases where purchasers have been able to sue for restitution due to misrepresented square footage; it's caveat emptor and buyer is required to do their due diligence, as well as prove an intent on the part of the seller to commit malfeasance and defraud. This is very hard to prove; this is also why every MLS has some sort of disclaimer regarding listed square footage, indicating that although information is believed accurate, it’s not guaranteed. The courts have generally held that these disclaimers protect real estate practitioners from liability for inaccurate square footage numbers.
At the end of the day, what does the square footage matter anyway, unless your taxes are higher as a result (which you can then contest)? Especially considering it's attic space and not usable living space; clearly OP thought the rest of the house was fine in terms of flow and floorplan or they wouldn't have submitted an offer, and really, the flow and floorplans are all that matter. I could show you a choppy 3000sf house with a poor floorplan and a well laid-out 2500sf place that flows efficiently, and you'd probably pick the smaller place 9 times out of 10.
In any event, in my opinion, OP is just providing a distraction for themselves worrying about the sq footage of the attic when their real issue is the poor advice given to them by their agent by having them waive their mortgage contingency. Hopefully OP has an inspection contingency that will allow them to skate out of the contract unscathed; otherwise, they will have to either come up with a significant chunk of change out of pocket or forfeit their earnest deposit and start the search anew.
Time to find $19K to add to your down payment.
If you do not, the seller is going to sue you (and win).
Either for 100% of your deposit + legal fees
or
for specific performance.
Is the idea of foregoing the mortgage contingency when you're financing a mortgage a new one? I never read about it until a couple years ago. It seems like just another crazy unethical way the more unscrupulous realtors have come up with to try to close deals.
It's even more irresponsible given that this is a condo, which banks are notoriously pickier over.
Wow, good luck OP. Think of this as a good learning moment, and hopefully you can find $19k. I wouldn't worry about the square footage difference. Hopefully you did your research and are paying what you feel is a fair price.
The appraisal is a problem from a financing perspective only. Don't think it's the "true" value of the condo. The market decides that. Banks are more conservative in this climate.
Thank you everyone for your quick replies. For a moment, let's keep the sq ft issue aside and let me give you some info abt the appraisal. When my real estate agent came up with the value for the house, it was an avg across all the comps. Now the previous townhouse which was sold for 490K went under the comparable market value because it was a full cash. My agent spoke with the bank and came to know that they are evaluating my townhouse based on the previous townhouse that was sold recently for 490K and it happend after i signed the P&S. My agent tries convincing the bank that it went under the market value because it was a full cash offer and there are other comps which are above the 522K. Bank is dealing with the appraisal only from the direct comp from the same community. It is also not considering the totally finished with carpet, recessed lighting, full size windows and a door walk out basement as full sq footage. I dont know how o convince the bank that my sale value is according to the current market but the previous one went way under the comps
Thank you everyone for your quick replies. For a moment, let's keep the sq ft issue aside and let me give you some info abt the appraisal. When my real estate agent came up with the value for the house, it was an avg across all the comps. Now the previous townhouse which was sold for 490K went under the comparable market value because it was a full cash. My agent spoke with the bank and came to know that they are evaluating my townhouse based on the previous townhouse that was sold recently for 490K and it happend after i signed the P&S. My agent tries convincing the bank that it went under the market value because it was a full cash offer and there are other comps which are above the 522K. Bank is dealing with the appraisal only from the direct comp from the same community. It is also not considering the totally finished with carpet, recessed lighting, full size windows and a door walk out basement as full sq footage. I dont know how o convince the bank that my sale value is according to the current market but the previous one went way under the comps
When you say that your contract price was determined as an average of all the current comps for your townhouse complex, what were the actual closed sale prices for the last 3-5 townhomes that recently sold?
If they were all at the $520K+ range (if you're saying your $522K price was an average, then that there should be at least 2-3 that are at or above that price), one comp at $490 shouldn't have torpedoed your price that badly.
You state that the bank's appraiser is only considering only comps from the complex; not sure why you think they shouldn't, as those are the most direct set of comps you can actually get. Now, if those comps are for sales that aren't within the last 3-6 months, then you def have a legitimate gripe, but otherwise, that's exactly what they should be looking at for valid comparables. The finished carpet, recessed lighting, etc etc are probably not going to add as much value as you feel; while those features may have a ton of value to you, dollar-wise they probably shouldn't amount to anywhere near what you need to have the loan go through.
There is just one recently sold comp in the townhouse complex $490K. All others are outside the townhouse community. How could bank depend so much on just one comp from the same community? The loan office mentioned that low appraisal is due to that one comp.
Time to find $19K to add to your down payment.
If you do not, the seller is going to sue you (and win).
Either for 100% of your deposit + legal fees
or
for specific performance.
I have a very hard time believing you would convince a judge to levy specific performance in resale residential against a buyer. That is what the deposit is for.
Sounds like if you can't come up with the difference, you either need to renegotiate the deal or walk and lose your deposit.
Time to find $19K to add to your down payment.
If you do not, the seller is going to sue you (and win).
Either for 100% of your deposit + legal fees
or
for specific performance.
There is just one recently sold comp in the townhouse complex $490K. All others are outside the townhouse community. How could bank depend so much on just one comp from the same community? The loan office mentioned that low appraisal is due to that one comp.
No, I waived the inspection contingency also.
Urgh;that's unfortunate. Have you conducted an inspection or was that a condition of your offer?
How hot is your housing market? Are homes flying off the market or stagnating for months?
While I don't think just that one sold comp should have completely torpedoed your appraisal, I can understand more of an importance being placed upon it, as it's a rather direct comp and it's the most recent.
What were the prices for the other comps used in the appraisal? Do you know and can share? That could be very useful to the discussion.
Be that as it may, you have a couple of options and none of them are good:
You come up with $19K in order to fulfill the contract and close on your house
You try to renegotiate the price down with the seller. Seller, if you're not in an ultra-competitive market, should be motivated as they now know their place won't appraise for more than $503K (and could be lower as time goes on and lower comps come in).
You can walk away and forfeit your earnest money
You can search for a new lender and hopefully get a higher appraisal; that would mean negotiating with the seller for an extension of your contract, which they may not be willing to do
Unfortunately, with your waiving of contingencies, those seem to be your only options, unless your contract has some really wonky language that would permit you to cancel without penalty.
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