First Home Purchase - Disagreement on Appraisal Contingency

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Topic Author
dcw213
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by dcw213 » Thu Jul 25, 2019 12:18 pm

FreemanB wrote:
Thu Jul 25, 2019 12:07 pm
dcw213 wrote:
Thu Jul 25, 2019 8:18 am
I am in an unexpected situation in going through my first home purchase. We made an offer on a house at list price very soon after it went on market and it was accepted quickly. We are in attorney review now. We went through inspection and settled on some terms for repairing defects etc. Unexpectedly the sellers attorney rejected our request for an appraisal contingency, citing the fact that I am putting more than 20% down as a reason that I will still get my desired mortgage product if the property appraises low.
You raise a good point. I asked the same question and was told it was standard to include during the attorney review process. A lesson learned for me but still getting lots of different opinions on what standard practice is.

I'm confused about something. When you made your initial offer, it should have included any and all contingencies you desired. You said they accepted that offer quickly, and it sounds like there was no appraisal contingency included. So did you have an accepted offer on the home, without the appraisal contingency? Then later in the process, after the inspection was completed and settled, you wanted to modify your offer to include an additional contingency for the appraisal. If that is the case, I wouldn't accept your request either, not at this point in the process.(It may have been acceptable in the beginning, but the lack of contingencies may have influenced how quickly they accepted your offer) It doesn't matter what reasons they gave, since they didn't actually have to give any to reject your request to modify the sales contract. If I were the seller, I would also reject any attempt to modify the sales contract this late in the process, particularly if there was no need for it.(You haven't even completed the appraisal yet)

UALflyer
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by UALflyer » Thu Jul 25, 2019 1:02 pm

dcw213 wrote:
Thu Jul 25, 2019 12:18 pm
A lesson learned for me but still getting lots of different opinions on what standard practice is.
People use the phrase "standard practice" all the time because they don't really understand the reasons behind it but figure that they should follow it because others must know something that they don't.

In reality, arguing whether something is or is not "standard practice" tends to be pointless for precisely the reasons that you mention, as you will frequently find a lot of exceptions to all these "standard practices." What tends to be more productive and useful is for you to understand the rationale behind it and then to determine whether the same rationale applies in your particular situation. In other words, if a "standard practice" would present no practical benefits in your situation, there is no point in jeopardizing a deal that you're otherwise happy with by arguing over a largely meaningless point.

In general, appraisal contingencies are very common in residential real estate because most people don't have the money to put more than 20% down. For those people, appraisal contingencies protect homebuyers from being forced to pay (higher) PMI, higher interest rates and also protect homebuyers in situations where a low appraisal makes it impossible for them to obtain financing.

Assuming that you're otherwise protected from the LTV being higher than 80%, the above rationale does not apply to you. So, the reason that you'd insist on such a contingency in your case is primarily in the hopes of using a low appraisal as an excuse (it's an "excuse," as it wouldn't otherwise affect the terms of your financing and would not cause you to bring more money to the table) to renegotiate the price and/or for psychological reassurance that you're getting a fair deal. You need to weigh the importance of these things against the risk that this deal could implode because of this. Whether or not this contingency is "standard" does not really control nor should it affect the way that you're looking at this issue.

Ping Pong
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by Ping Pong » Thu Jul 25, 2019 1:38 pm

There was a thread not long ago here in which a seller was posting about a buyer whose appraisal came in too low. It’s funny that Boggleheads(tm) are giving opposite advice here than they gave in the other thread.

In the other thread, most people said to lower the price to the appraisal. In this thread, they are saying to pay the contract price even if the appraisal ends up being low.

chevca
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by chevca » Thu Jul 25, 2019 2:04 pm

miles monroe wrote:
Thu Jul 25, 2019 11:22 am
would you pay $25,000 for a pack of gum?

if not, why would you overpay $25,000 on a house? same thing when you get right down to it.
Except that it's nowhere near the same thing. :confused :confused

UALflyer
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by UALflyer » Thu Jul 25, 2019 2:14 pm

Ping Pong wrote:
Thu Jul 25, 2019 1:38 pm
There was a thread not long ago here in which a seller was posting about a buyer whose appraisal came in too low. It’s funny that Boggleheads(tm) are giving opposite advise here than they gave in the other thread.

In the other thread, most people said to lower the price to the appraisal. In this thread, they are saying to pay the contract price even if the appraisal ends up being low.
That's not a fair characterization of the two situations, which are actually quite different.

The OP isn't told to pay the contract price even if the appraisal ends up being low. The OP is told that appraised values don't really tell him whether he is getting a fair deal or not. So, if he is otherwise happy with the house and the deal, potentially losing this deal over an appraisal contingency (and again, there isn't enough information here to tell how likely a low appraisal even is; likewise, just because there's a low appraisal does not mean that the seller would agree to reduce the price of the house that just very recently came on the market and immediately went under contract at list price) in a situation where a low appraisal would not otherwise have any practical effect on the OP wouldn't make a lot of sense.

As a seller, if your contract contains an appraisal contingency and the appraisal comes in low, you have to look at the market and the appraisal. If you believe the low appraisal to be a fluke, meaning that there are solid comps available out there that support the value, and there's a reasonable probability of another buyer offering the same or better price, then you might as well hold firm on the price. If, on the other hand, the comps are such that another appraisal is once again likely to be low and most of the buyers for the particular property are using low downpayments, then holding firm wouldn't make much sense, as another buyer willing to pay a higher price just wouldn't be able to obtain financing for it.

bsteiner
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by bsteiner » Thu Jul 25, 2019 3:01 pm

While it's likely to be dependent on the lender's appraisal, the mortgage contingency I've seen in New York and New Jersey is that the contract is contingent on the buyer obtaining a mortgage loan for $x (and the buyer agrees to apply for such a loan and pursue the application). Of course, real estate practice varies from state to state and sometimes within a state, so it could be different in other states.

If the buyer was planning to put more than 20% down, then a lower appraised value might not matter. For example, if the price is $400,000 and the buyer was planning on putting $100,000 down and borrowing $300,000, and the appraised value is $375,000, the bank may still lend $300,000 (80% of $375,000). However, some banks give a better rate when the loan doesn't exceed 75% of value, so the buyer might not be able to get that rate.

London
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by London » Thu Jul 25, 2019 3:02 pm

This is one of the most conservative boards and some of the replies reflect that.

Whether or not this is common would be specific to your market. I understand the sellers point of view in that they don’t want to waste time with you during the heart of the selling season if you are going to walk away over 25k.

If I wanted the house and I had the cash to cover it if the appraisal was light, I would waive it. Appraisals can be all over the map and are usually slow to reflect market trends in hot markets.

Dottie57
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by Dottie57 » Thu Jul 25, 2019 3:21 pm

OP, doyou have extra money to put into the property if the appraisal comes in low?

simas
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by simas » Thu Jul 25, 2019 3:30 pm

dcw213 wrote:
Thu Jul 25, 2019 8:18 am
My agent and attorney say that this request is extremely standard as a buyer protection
appraisal contingency (as any other contingency ) greatly favors the buyer and disadvantage to the seller. If some reason (appraisal person had a bad day, had wrong data in the database ,etc), the "value" comes up low, buyer will absolutely demand price reduction. if , for another reason, appraisal comes up higher than listing price, I have yet to hear of the buyer wanting to offer more money. That is why sellers removed it.

Whether or not it is acceptable to you, no one on this board would be able to say. It is exactly why you have you real estate agent who can run comparable for you, tell of based on their expertise on how the market is, how this or that specific house is priced, etc. market dictates everything. if the seller does not to deal with BS above, then they can remove it and you can either go with out or take a hike. if market is slow you have more leverage, if market is sellers market you have little leverage and again make your decision. It is very unlikely you will be able to sway the seller.

talk to your agent. breath out. relax.


I have been buyer and seller multiple times. if I were the seller again, first time buyer offer worth much less to me as they take longer and there is higher chance of unreasonable here (no, you know you are buying 80 year old house and it will not be the same as new construction. if you want new construction , there is one next door for 2X the price, go for it and good luck..)

cherijoh
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by cherijoh » Thu Jul 25, 2019 3:38 pm

Admiral wrote:
Thu Jul 25, 2019 8:31 am
Who is demanding the appraisal? Your mortgage company? Are you pre-approved for the loan amount?
Pre-approval is based on buyer's financials. But if the house you wish to purchase appraises below the offered amount, you aren't guaranteed the amount you want to borrow at the cost you want to pay. If your loan is contingent on making a 20% downpayment, that means the bank will only loan you 80% of appraised value. You would be expected to come up with the difference. Otherwise you might end up with PMI or a higher interest rate (for a loan without PMI).

grok87
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by grok87 » Thu Jul 25, 2019 4:08 pm

Userdc wrote:
Thu Jul 25, 2019 8:36 am
This seems like a reasonable ask from the seller. You’ve agreed on the price and they don’t want to give you a free option to get cold feet and force them to find another buyer or try to renegotiate if the appraisal comes in slightly low.

Appraisals are a wild card and can come in all over the place. 5 different appraisers will give you 5 different values.

The appraisal contingency is really there for those that are down payment constrained ie, do not have the ability to close unless they can get a certain amount of financing. If you have the wiggle room to put down a slightly larger down payment, I think the sales price minus $25k is plenty fair.

Next time don’t let on that you are putting more than 20% down!
Agree
RIP Mr. Bogle.

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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by JGoneRiding » Thu Jul 25, 2019 4:30 pm

Mike Scott wrote:
Thu Jul 25, 2019 8:59 am
All real estate is local but in our area this would be a signal that the house was overpriced. 10% or so off list price is a typical selling price.
Lol I have sold (selling) 2 houses in last 2 years. We took no offers AT list price let alone under! In pretty much the whole west cost list is just lowest and all offers are expected to be higher! Even for "starter homes"

Topic Author
dcw213
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by dcw213 » Thu Jul 25, 2019 5:48 pm

UALflyer wrote:
Thu Jul 25, 2019 1:02 pm
dcw213 wrote:
Thu Jul 25, 2019 12:18 pm
A lesson learned for me but still getting lots of different opinions on what standard practice is.
People use the phrase "standard practice" all the time because they don't really understand the reasons behind it but figure that they should follow it because others must know something that they don't.

In reality, arguing whether something is or is not "standard practice" tends to be pointless for precisely the reasons that you mention, as you will frequently find a lot of exceptions to all these "standard practices." What tends to be more productive and useful is for you to understand the rationale behind it and then to determine whether the same rationale applies in your particular situation. In other words, if a "standard practice" would present no practical benefits in your situation, there is no point in jeopardizing a deal that you're otherwise happy with by arguing over a largely meaningless point.

In general, appraisal contingencies are very common in residential real estate because most people don't have the money to put more than 20% down. For those people, appraisal contingencies protect homebuyers from being forced to pay (higher) PMI, higher interest rates and also protect homebuyers in situations where a low appraisal makes it impossible for them to obtain financing.

Assuming that you're otherwise protected from the LTV being higher than 80%, the above rationale does not apply to you. So, the reason that you'd insist on such a contingency in your case is primarily in the hopes of using a low appraisal as an excuse (it's an "excuse," as it wouldn't otherwise affect the terms of your financing and would not cause you to bring more money to the table) to renegotiate the price and/or for psychological reassurance that you're getting a fair deal. You need to weigh the importance of these things against the risk that this deal could implode because of this. Whether or not this contingency is "standard" does not really control nor should it affect the way that you're looking at this issue.
Conceptually I am with you on all points. I think it is fair for me to entertain the advice from my counsel in the event that it is indeed common (they have seen hundreds of transactions, this is my first). Turns out I wasn’t comfortable with their ability to explain to me why it made sense so I accepted the seller’s proposal. UALFlyer explained things pretty much exactly as I processed them. Thanks everyone for the thoughts, it was extremely helpful to me today.

michaeljc70
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by michaeljc70 » Thu Jul 25, 2019 6:21 pm

drk wrote:
Thu Jul 25, 2019 9:30 am
This seller is being unreasonable. It’s such an asinine demand that they likely just want to use it as leverage to get something else out of you.
The BUYER is asking for the appraisal contingency which is not standard.

An appraisal contingency is typically moot because you have the mortgage contingency.

drk
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by drk » Thu Jul 25, 2019 8:39 pm

michaeljc70 wrote:
Thu Jul 25, 2019 6:21 pm
The BUYER is asking for the appraisal contingency which is not standard.

An appraisal contingency is typically moot because you have the mortgage contingency.
That it’s typically moot does not mean that it’s non-standard. Appraisal is a completely normal contingency.

michaeljc70
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by michaeljc70 » Thu Jul 25, 2019 8:48 pm

drk wrote:
Thu Jul 25, 2019 8:39 pm
michaeljc70 wrote:
Thu Jul 25, 2019 6:21 pm
The BUYER is asking for the appraisal contingency which is not standard.

An appraisal contingency is typically moot because you have the mortgage contingency.
That it’s typically moot does not mean that it’s non-standard. Appraisal is a completely normal contingency.
It isn't in the standard contract in the big city I live in. I checked and it isn't in the standard contract in the 3 biggest cities in the US. It isn't in the contract where the buyer is (attorney wants to add it). Where is it standard?

drk
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by drk » Thu Jul 25, 2019 9:07 pm

michaeljc70 wrote:
Thu Jul 25, 2019 8:48 pm
It isn't in the standard contract in the big city I live in. I checked and it isn't in the standard contract in the 3 biggest cities in the US. It isn't in the contract where the buyer is (attorney wants to add it). Where is it standard?
Ah, semantics. Here in Seattle, it’s part of NWMLS Form 22A, an addendum form covering the financing contingency. Does that make it non-standard according to your definition?

nps
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by nps » Thu Jul 25, 2019 9:13 pm

michaeljc70 wrote:
Thu Jul 25, 2019 8:48 pm
drk wrote:
Thu Jul 25, 2019 8:39 pm
michaeljc70 wrote:
Thu Jul 25, 2019 6:21 pm
The BUYER is asking for the appraisal contingency which is not standard.

An appraisal contingency is typically moot because you have the mortgage contingency.
That it’s typically moot does not mean that it’s non-standard. Appraisal is a completely normal contingency.
It isn't in the standard contract in the big city I live in. I checked and it isn't in the standard contract in the 3 biggest cities in the US. It isn't in the contract where the buyer is (attorney wants to add it). Where is it standard?
It's in the California standard contract, for one. Pretty big state!

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LilyFleur
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by LilyFleur » Thu Jul 25, 2019 9:14 pm

drk wrote:
Thu Jul 25, 2019 9:35 am
rascott wrote:
Thu Jul 25, 2019 9:31 am
"We made an offer on a house at list price very soon after it went on market and it was accepted quickly."

Sounds to me like it was at least somewhat a competitive market.
That sentence implies nothing at all about the competitiveness of the market.
Actually, in a seller's market, a list price offer can be the lowest offer, and the house can actually sell for much more than the list price. Then the seller can cherry pick their buyer, ie, take a buyer without a contingency to sell their previous house, and a buyer with a good-sized downpayment who is a stronger offer. This has happened to me.

The OP probably wanted to come in at full price, and fast, to make sure they got the house.

rascott
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by rascott » Thu Jul 25, 2019 9:20 pm

Ping Pong wrote:
Thu Jul 25, 2019 1:38 pm
There was a thread not long ago here in which a seller was posting about a buyer whose appraisal came in too low. It’s funny that Boggleheads(tm) are giving opposite advice here than they gave in the other thread.

In the other thread, most people said to lower the price to the appraisal. In this thread, they are saying to pay the contract price even if the appraisal ends up being low.
No...I'm probably one of the few Realtors on here. I gave advice to the seller of the under-appraised home to not drop his price, let the buyer walk and get another buyer.

I also gave this buyer the advice to not make a big deal out of the ask on the contingency. Both were in strong sellers markets (from the info they gave).

I'm only giving advice that I would give my own client. In both cases these were homes that were on the market for 1 day.

Studies have shown that Realtors keep their own homes on the market longer, and get higher values for them. Most buyers/sellers only do these transactions once per 7-8 years and act out of emotion.

Yooper16
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by Yooper16 » Thu Jul 25, 2019 9:34 pm

I'm easily confused and maybe mis-reading something.

Is the apprasail contingency an additional item added after you've already have an signed agreement on price etc.

In all our experiences the apprasail contingency(if one was requested ) was part of the sales agreement from the minute we signed with the offer either selling or buying?

Freetime76
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by Freetime76 » Thu Jul 25, 2019 9:50 pm

rascott wrote:
Thu Jul 25, 2019 9:20 pm
Ping Pong wrote:
Thu Jul 25, 2019 1:38 pm
There was a thread not long ago here in which a seller was posting about a buyer whose appraisal came in too low. It’s funny that Boggleheads(tm) are giving opposite advice here than they gave in the other thread.

In the other thread, most people said to lower the price to the appraisal. In this thread, they are saying to pay the contract price even if the appraisal ends up being low.
No...I'm probably one of the few Realtors on here. I gave advice to the seller of the under-appraised home to not drop his price, let the buyer walk and get another buyer.

I also gave this buyer the advice to not make a big deal out of the ask on the contingency. Both were in strong sellers markets (from the info they gave).

I'm only giving advice that I would give my own client. In both cases these were homes that were on the market for 1 day.

Studies have shown that Realtors keep their own homes on the market longer, and get higher values for them. Most buyers/sellers only do these transactions once per 7-8 years and act out of emotion.
I love the last paragraph, above. I am going to reread, because we have a house for sale.

It said the OP’s contract is under attorney review. I never had this review for our homes, all were standard forms. Is this a FSBO or commercial? Or is this the usual in some area?
Incidentally, I did check 2 previous contracts, and the appraisal contingency was included ( not hot markets). I thought the idea was to protect me from having to close on the house if low appraisal, and yes, it was somewhat redundant with the financing contingency.

Of course, the seller did not *have* to accommodate on price if the appraisal was low...it would be a negotiation, or they could just say “no” :D Shockingly, appraisers were just slightly over the purchase price (up 1%). I’d say homes went for within 2-3% of list at the time.

UALflyer
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by UALflyer » Thu Jul 25, 2019 10:05 pm

drk wrote:
Thu Jul 25, 2019 9:07 pm
michaeljc70 wrote:
Thu Jul 25, 2019 8:48 pm
It isn't in the standard contract in the big city I live in. I checked and it isn't in the standard contract in the 3 biggest cities in the US. It isn't in the contract where the buyer is (attorney wants to add it). Where is it standard?
Ah, semantics. Here in Seattle, it’s part of NWMLS Form 22A, an addendum form covering the financing contingency. Does that make it non-standard according to your definition?
This exchange is Exhibit 1 to my explanation that debating whether something is "standard" in these types of situations is a completely pointless and counterproductive exercise that people tend to engage in when they don't understand the actual rationale behind something. It just gets both sides frustrated without actually getting to the root of the problem.

Once again, suppose that you are correct and an appraisal contingency is "standard." Now what? Are you going to allow the fact that you believe it to be "standard" to cause the deal to fall apart, even if you are otherwise happy with the deal and this so-called "standard" contingency would carry very little or no practical significance in your particular situation?

Unfortunately, this is exactly how a lot of people tend to approach these types of negotiations, which just causes them to make irrational financial decisions that have a very real cost associated with them.

If you don't like the deal or believe that its structure exposes you to an unreasonable financial risk that you'd be able to avoid in another transaction, then by all means you should walk away. Just don't let your emotions control your long term financial future and don't walk away over a meaningless point, all because you believe that you're right about this meaningless point being "standard."

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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by rascott » Fri Jul 26, 2019 12:31 am

Freetime76 wrote:
Thu Jul 25, 2019 9:50 pm
rascott wrote:
Thu Jul 25, 2019 9:20 pm
Ping Pong wrote:
Thu Jul 25, 2019 1:38 pm
There was a thread not long ago here in which a seller was posting about a buyer whose appraisal came in too low. It’s funny that Boggleheads(tm) are giving opposite advice here than they gave in the other thread.

In the other thread, most people said to lower the price to the appraisal. In this thread, they are saying to pay the contract price even if the appraisal ends up being low.
No...I'm probably one of the few Realtors on here. I gave advice to the seller of the under-appraised home to not drop his price, let the buyer walk and get another buyer.

I also gave this buyer the advice to not make a big deal out of the ask on the contingency. Both were in strong sellers markets (from the info they gave).

I'm only giving advice that I would give my own client. In both cases these were homes that were on the market for 1 day.

Studies have shown that Realtors keep their own homes on the market longer, and get higher values for them. Most buyers/sellers only do these transactions once per 7-8 years and act out of emotion.
I love the last paragraph, above. I am going to reread, because we have a house for sale.

It said the OP’s contract is under attorney review. I never had this review for our homes, all were standard forms. Is this a FSBO or commercial? Or is this the usual in some area?
Incidentally, I did check 2 previous contracts, and the appraisal contingency was included ( not hot markets). I thought the idea was to protect me from having to close on the house if low appraisal, and yes, it was somewhat redundant with the financing contingency.

Of course, the seller did not *have* to accommodate on price if the appraisal was low...it would be a negotiation, or they could just say “no” :D Shockingly, appraisers were just slightly over the purchase price (up 1%). I’d say homes went for within 2-3% of list at the time.

Some states have required attorney reviews of all contracts. (Illinois, maybe others). Most states do not and they are handled by only the agents and title companies,

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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by drk » Fri Jul 26, 2019 12:51 am

UALflyer wrote:
Thu Jul 25, 2019 10:05 pm
This exchange is Exhibit 1
You appear to be reading way more into my posts than is really there, so please stop quoting me.

drk
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by drk » Fri Jul 26, 2019 12:53 am

LilyFleur wrote:
Thu Jul 25, 2019 9:14 pm
drk wrote:
Thu Jul 25, 2019 9:35 am
rascott wrote:
Thu Jul 25, 2019 9:31 am
"We made an offer on a house at list price very soon after it went on market and it was accepted quickly."

Sounds to me like it was at least somewhat a competitive market.
That sentence implies nothing at all about the competitiveness of the market.
Actually, in a seller's market, a list price offer can be the lowest offer, and the house can actually sell for much more than the list price. Then the seller can cherry pick their buyer, ie, take a buyer without a contingency to sell their previous house, and a buyer with a good-sized downpayment who is a stronger offer. This has happened to me.

The OP probably wanted to come in at full price, and fast, to make sure they got the house.
I don’t think you understand what you responded to. So far, we know that the seller got one offer, from the OP, at list price. This does not imply anything about the competition in the market.

Sorry you had a bad experience in a seller’s market, though.

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LilyFleur
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by LilyFleur » Fri Jul 26, 2019 2:30 am

drk wrote:
Fri Jul 26, 2019 12:53 am
LilyFleur wrote:
Thu Jul 25, 2019 9:14 pm
drk wrote:
Thu Jul 25, 2019 9:35 am
rascott wrote:
Thu Jul 25, 2019 9:31 am
"We made an offer on a house at list price very soon after it went on market and it was accepted quickly."

Sounds to me like it was at least somewhat a competitive market.
That sentence implies nothing at all about the competitiveness of the market.
Actually, in a seller's market, a list price offer can be the lowest offer, and the house can actually sell for much more than the list price. Then the seller can cherry pick their buyer, ie, take a buyer without a contingency to sell their previous house, and a buyer with a good-sized downpayment who is a stronger offer. This has happened to me.

The OP probably wanted to come in at full price, and fast, to make sure they got the house.
I don’t think you understand what you responded to. So far, we know that the seller got one offer, from the OP, at list price. This does not imply anything about the competition in the market.

Sorry you had a bad experience in a seller’s market, though.
I had a great experience--I was the seller. My place sold in two days. And, yes, a seller's market is a competitive market for buyers to get any decent home at all.

I'm not the only one who understood that the OP was in a competitive sellers market.

The realtor above said: I also gave this buyer the advice to not make a big deal out of the ask on the contingency. Both were in strong sellers markets (from the info they gave).

I'm only giving advice that I would give my own client. In both cases these were homes that were on the market for 1 day.

vested1
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by vested1 » Fri Jul 26, 2019 6:25 am

Our home sold a few weeks ago at about 45k over comps in a HCOL area. Our asking price was 35k over comps. The buyer put down 55% and upped his bid by 3k after finding out there were other competing offers. I was surprised to learn from my realtor that the house still needed to appraise for the asking price, which it did, but only because the lowest bid of 5 was at full asking price.

The appraisal came in at asking because of the immediate over asking offers. Contrary to what some here have said, we were willing to walk away rather than lower the price because there were additional requests to view the house even after it entered escrow, which began before the appraisal was completed. The buyer had also stated that he would make up the difference in the appraisal if it came in below the asking price. It all depends on the existing market where the house is being sold.

In California, where we sold our home, earnest money is refunded for any reason if the seller wants to back out. Not so where we are moving to, as there must be something that contradicts disclosures in order to cancel the contract.

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vineviz
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by vineviz » Fri Jul 26, 2019 6:30 am

AZAttorney11 wrote:
Thu Jul 25, 2019 9:10 am
0% chance I’d agree to waive an appraisal contingency as a buyer.
+1
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

brianH
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by brianH » Fri Jul 26, 2019 8:30 am

rascott wrote:
Thu Jul 25, 2019 9:20 pm
Studies have shown that Realtors keep their own homes on the market longer, and get higher values for them. Most buyers/sellers only do these transactions once per 7-8 years and act out of emotion.
To be fair, though, that emotion can act both ways. It's pretty common to see a seller list at a 'shoot for the moon price' only to have the property sit on the market for months before it ultimately gets numerous price reductions to bring it more in line with what it should have listed for originally. That whole time the seller is paying mortgage+taxes+insurance, not to mention the inconvenience of keeping a house in 'show-ready' condition and being available for last-minute requests for showings.

Personally, I listed my last place for about 5-10% less (on a 220K property) than I realistically, objectively could have gotten. What I 'purchased' with that ~$10-20K was an offer within 6 days, a buyer that wasn't inclined to clobber me with inspection items, and less stress. If you're looking to move to a new house (which I image most sellers are), time usually isn't on your side. There's a very real cost to keeping a property on the market longer, which isn't always appreciated fully.

donall
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by donall » Fri Jul 26, 2019 8:54 am

Loan is based on appraisal and is part of bank procedures. I would not mess with that. Unless you really want this house and are prepared to hand over more money for a down payment if necessary.... As a seller, I would try to get this contingency, but would not scrap the deal because of it. Not sure of your market, but assuming house is now under contract. Putting it now back on market would diminish value. And realistically, would seller realistically be able to get a better offer? What does your attorney say?

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ResearchMed
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Re: First Home Purchase - Disagreement on Appraisal Contingency

Post by ResearchMed » Fri Jul 26, 2019 1:07 pm

donall wrote:
Fri Jul 26, 2019 8:54 am
Loan is based on appraisal and is part of bank procedures. I would not mess with that. Unless you really want this house and are prepared to hand over more money for a down payment if necessary.... As a seller, I would try to get this contingency, but would not scrap the deal because of it. Not sure of your market, but assuming house is now under contract. Putting it now back on market would diminish value. And realistically, would seller realistically be able to get a better offer? What does your attorney say?
As a *seller* you would try to get an appraisal contingency, or as a *buyer* you would do that?
Doesn't this contingency help the buyer?

RM
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