Financing in 10462>Question Details

Shujolnyc, Home Buyer in 10462

Must you accept any financing offer to satisfy a contingency?

Asked by Shujolnyc, 10462 Tue Aug 14, 2012

My loan application for a conventional mortgage will be denied as the property appraisal did not meet the contract price. However, the mortgage broker said I could get a loan with 86% loan-to-value ration and pay nearly $275 PMI. I put in an application in good faith and it will be denied, am I forced to take/consider the option I don't want?

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This sort of issue in my opinion is never (or should never) be an issue with FHA or VA loans due to the wording of the amendatory clause which both Purchaser and buyer must sign which will state in sum that if the property does not appraise for the agreed upon purchase price (including seller's concessions), then the Purchaser will be refunded the downpayment in full.

The problem comes up where there is contradictory language in a rider. My stance has been, contradictory language voids the ability to get a loan and therefore you have the right to your Down payment back

Here I believe this was a conventional loan. In those cases, I always make sure I insert the following into my contracts:

If the property does not appraise for the contract price Purchaser reserves the right to void the contract and receive the return of his/her entire deposit or the parties may try to renegotiate the purchase price and proceed to closing.
2 votes Thank Flag Link Thu Oct 18, 2012
Steven Colon is a very knowledgeable attorney in the area. He has provided you with some great information. I wish you the best of luck!
0 votes Thank Flag Link Thu Jun 13, 2013
I joined this post late, I appologize since I am new to Trulia. My husband and I were discussing this, he is an attorney. What we were wondering was, did your contract speak to this possibility. The majority of the time, where no concession is involved, the contract will not address this issue and therefore.... see Trevor's posts. The only change in the below, would be if the seller drafted language which spoke to this in a rider which you agreed to, then in that event, you would be bound by the terms of the rider.
0 votes Thank Flag Link Thu Oct 18, 2012
Good evening Shujolnyc,

Did you discuss the option of reducing the price with the Seller? Did you discuss this with your Attorney? A good real estate Attorney will call the Seller's Attorney to discuss a price reduction. This should be your first step before you consider financing alternatives. It is a Buyer's Market, after all.

Here's my General Primer about appraisals that come in short:

When the bank appraisal comes in for less than the contract price there are FOUR ways to proceed with the transaction.


1.The Purchaser comes up with the difference in cash. If the appraisal is less than the Purchase price, the Seller basically assumes the Purchaser wishes to buy the house according to the terms of the contract, including the agree upon Purchase Price and therefore will come up with the cash necessary to complete the transaction.

2.The Purchaser and the Seller meet in the middle. The Purchaser comes up with some cash but the Seller also agrees to reduce the price enough to meet the Purchaser somewhere “in the middle.” Both sides want to complete the transaction and so they work it out. This is compromise at its best.

3.The Seller reduces the Purchase Price to equal the Appraised value. This is the least likely scenario. Sellers often want to complete the purchase transaction on the original terms of the contract, including the price.

4.Nothing happens and the deal is cancelled. The Purchaser either cannot or will not come up with the extra cash and the Seller refuses to reduce the price completely or even a little bit to meet the Purchaser. In this case the transaction is cancelled, the Down Payment is returned, and everyone goes home unhappy. The Purchaser has to begin all over again and the Seller has to put the house on the market and try to find a new Purchaser.

In the end, the motivations of all parties to make the deal happen and close the transaction rule the day. Those motivations drive everyone to find a solution and get the deal closed. Or not.

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528
0 votes Thank Flag Link Tue Aug 14, 2012
Good evening Shujolnyc,

If the appraisal came in for less than the contract price then you should be negotiating with the Seller to lower the price, not considering a financing alternative.

Have you discussed this with your Attorney? A good real estate attorney will contact the Seller's attorney to discuss the reduced appraisal. This is a Buyer's market and your first step should be to request the Seller reduce the price.

Here's my General Primer when an appraisal comes in short:

When the bank appraisal comes in for less than the contract price there are FOUR ways to proceed with the transaction.



1.The Purchaser comes up with the difference in cash. If the appraisal is less than the Purchase price, the Seller basically assumes the Purchaser wishes to buy the house according to the terms of the contract, including the agree upon Purchase Price and therefore will come up with the cash necessary to complete the transaction.

2.The Purchaser and the Seller meet in the middle. The Purchaser comes up with some cash but the Seller also agrees to reduce the price enough to meet the Purchaser somewhere “in the middle.” Both sides want to complete the transaction and so they work it out. This is compromise at its best.

3.The Seller reduces the Purchase Price to equal the Appraised value. This is the least likely scenario. Sellers often want to complete the purchase transaction on the original terms of the contract, including the price.

4.Nothing happens and the deal is cancelled. The Purchaser either cannot or will not come up with the extra cash and the Seller refuses to reduce the price completely or even a little bit to meet the Purchaser. In this case the transaction is cancelled, the Down Payment is returned, and everyone goes home unhappy. The Purchaser has to begin all over again and the Seller has to put the house on the market and try to find a new Purchaser.

In the end, the motivations of all parties to make the deal happen and close the transaction rule the day. Those motivations drive everyone to find a solution and get the deal closed. Or not.

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528
0 votes Thank Flag Link Tue Aug 14, 2012
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