appraisals? (contingency, sales, banks, price)

[jasminescent]

Hypothetically speaking, let's say if I enter into a contract at a higher price that the appraisal is for. How do you get out of a contract or can you? once you find out that the house doesn't appraise for as much as your contract price?

[Squirl]

If written properly, your contract should indicate that one of the terms is the property appraises to the contract sales price. If it doesn't you can terminate the contract.

[rjrcm]

Squirl is correct, you should include in your contract an appraisal contingency that allows cancellation if the appraised value is more than purchase price. Typically, if this happens, the buyer will try to negotiate with the seller to lower the price to the appraised value, otherwise they will cancel.

[jasminescent]

is there a range within the appraisal price that the contract price should fall in?

[need_more_light]

Originally Posted by rjrcm

Squirl is correct, you should include in your contract an appraisal contingency that allows cancellation if the appraised value is more than purchase price. Typically, if this happens, the buyer will try to negotiate with the seller to lower the price to the appraised value, otherwise they will cancel.

I think you meant if the appraised value is "less than" the purchase price. Though, I wonder if the seller can do anything to raise the price up if the appraised value is more than the purchase price.

Also, from my understanding, you can still buy the house. However, you might have to come up with the difference in appraised value and the purchase price on your own. For example, you're buying a house that's listed at $350k but the appraised value is only $300k. The lender will only lend you the appraised value ($300k). Thus, if you still want that house, you'll have to come up with $50k. Please correct me if I'm wrong though.

[Squirl]

If I were the buyer I would have the contingency and use it to escape the deal if I agreed with the appraisal or had buyer's remorse. But if in fact the appraisal failed to achieve the sales price I would question the comps used. As a buyer aware of the competitive market, I would have bid on the house knowing the other like properties. The appraisal process is not an exact/perfect science and buyers typically know the value of the homes on which they make offers. I think buyer and seller should have as few adversarial issues as possible, so hopefully the buyer should challenge the appraisal and be very satisfied that it is correct and maybe permit the seller to pay for a 2nd appraisal in some situations if the appraiser is unwilling to re-evaluate and buyer really feels the appraisal is wrong (obviously the seller will think the appraisal is wrong)!

[rjrcm]

Originally Posted by need_more_light

I think you meant if the appraised value is "less than" the purchase price. Though, I wonder if the seller can do anything to raise the price up if the appraised value is more than the purchase price.

Also, from my understanding, you can still buy the house. However, you might have to come up with the difference in appraised value and the purchase price on your own. For example, you're buying a house that's listed at $350k but the appraised value is only $300k. The lender will only lend you the appraised value ($300k). Thus, if you still want that house, you'll have to come up with $50k. Please correct me if I'm wrong though.

Thanks, yes I meant "less than". And yes, the buyer has the option to pay the difference.

Normally, the seller would not be provided with the actual appraised value, just whether or not it met the purchase price requirement for the loan.

[USER876]

If the low appraisal effects your ability to get a loan, well that is one thing....

If you are just looking to confirm your negotiated price, well that is something else...

I have recently seen a few appraisals on the same property that were about 20K apart. The process is not an exact science, and recently, banks have been very conservative with the adjustments, so a person may be willing to buy a house higher than the appraisal comes in. If you really want the place, have done your homework, and are comfortable with the price, why cancel just because some bozo was trying to protect the bank?

[Annemieke Roell]

Originally Posted by Squirl

If I were the buyer I would have the contingency and use it to escape the deal if I agreed with the appraisal or had buyer's remorse. But if in fact the appraisal failed to achieve the sales price I would question the comps used. As a buyer aware of the competitive market, I would have bid on the house knowing the other like properties. The appraisal process is not an exact/perfect science and buyers typically know the value of the homes on which they make offers.

Surely you jest.

[ETex2]

Originally Posted by Annemieke Roell

Surely you jest.

Kinda scary that this person appears to be perfectly serious. Hey, that's an idea - forego the appraisal process. Since the buyer knows what the value is, just tell your lender and save yourself the appraisal fee! Surely they will take the buyer's word for it, right?