John M, Home Buyer in Northborough, MA

Appraisal contingency? I just had an accepted offer on a house and the appraisal came in almost 20 thousand below the agreed offer.

Asked by John M, Northborough, MA Tue Aug 2, 2011

Our agent put in the original offer contingent on inspection and appraisal and during the negotiation the seller rejected the appraisal contingency.

This was NOT mentioned to me by my agent, much of the back and forth was over the telephone. When we agreed on a price my agent had me come in and sign the offer, which at this point had the appraisal contingency removed. Again this was not pointed out to me and initially I made it clear that this contingency be in the offer.

When the appraisal came in low the seller refuses to negotiate the price. I dont want to overpay and am walking away. The seller is threatening to sue for the earnest money and this is becoming a huge pain. I spoke with the appraisor, even went over the comps with him and his number makes sense. My agent is trashing the appraisor and encouraging me to make the deal. I am furious at the agent and once they sort this out will fire them.

Help the community by answering this question:


There is not actually a question here, but it can be good to vent in public without revealing your identity, so go right ahead.

You need to talk to a real estate attorney, not just a relative who happens to be a lawyer.
1 vote Thank Flag Link Tue Aug 2, 2011
I am amazed at the misunderstanding of the issue by the local agents

John M.
I am sure that you have resolved this by now, once you got a lawyer involved. Basically you screwed up by signing the agreement that had the appraisal contingency removed. Even though your agent didnt tell you it is still on you to check what you sign. Sounds like your agent was anxious to get signed papers.

Anyhow if you can afford the extra downpayment to get your approved loan amount than you cant blow up a deal this way. If you had any contingencies based on findings at the inspection at the time of the appraisal it is still pretty easy to get out of a deal this way.
0 votes Thank Flag Link Wed Mar 14, 2012
Hi John,

When you originally submitted your offer, you should have provided a preapproval letter. This preapproval letter will have stated that you are approved for a mortgage in the amount of $X (hopefully consistent with what you offered on the subject property and no more). The preapproval amount takes into account your downpayment....the amount does not matter.

I'm not an attorney, and I do recommend that you speak to one, but this preapproval letter should say it all. Unless your preapproval letter represents a downpayment that is LARGER than that on your accepted offer, it is not up to your lender to determine whether you CAN put more down.

Unless I'm missing something, you are entitled to a return of your deposit.

Good luck and please let us know how you make out!

0 votes Thank Flag Link Wed Aug 3, 2011
Well im NOT in your state; HOWEVER, i am a 20 yrs certified appraiser AND REALTOR :) here in NV the appraisal contingency IS BUILT into our contract. Adn the seller DOES not have to sell for less; HOWEVER, the buyer also then has the out as they cannot get the loan if it doesnt appraise (unless they come up w/cash - no one usually will!) So if the appraisal doesnt come in, seller can choose to not sell and buyer can choose to walk and deal is done. EMD is refunded to buyer (as long as all other time frames were met). I would CAREFULLY read EVERY section of your contract and specifically LOOK for the section on appraisal. I would bet there is a clause built in :)
0 votes Thank Flag Link Tue Aug 2, 2011
I'm really sorry to hear about this - no fun! I agree that you need to speak with a real estate attorney right away and you absolutely need to get the broker of the company your agent works for involved. This is a big deal for everyone involved and you're the one with the deposit on the line.

In my opinion, the financing contingency does not cover you here because you waived the appraisal contingency. You not having the funds to close the deal does not mean the you don't qualify for the loan.

My advice would be to get the higher powers involved. Good luck - email me and let me know how it turns out, I'll be curious...
0 votes Thank Flag Link Tue Aug 2, 2011
You said you will fire "them" ... Who does this include?
0 votes Thank Flag Link Tue Aug 2, 2011
MDM and Judy
You guys have the same misunderstanding that my agent had. The house did not appraise and despite this the financing was not denied by my mortgage broker. Rather he offered me two options one was to put down a larger downpayment the other was to finance with the same amount down with a larger loan to value ratio and PMI.

I asked him specifically to just deny me the loan, in order to put this problem to bed. He said he could not deny me the loan, based on their evaluation of my financial situation I still qualified. The broker and my lawyer both warned against this as I would really invite legal trouble.
0 votes Thank Flag Link Tue Aug 2, 2011
John if the house doesn't appraise you will be denied your financing so you are covered under your mortgage contingency clause. What you really need to do is talk to your attorney
0 votes Thank Flag Link Tue Aug 2, 2011
Hi John,

You do not need an appraisal contingency if you have a financing contingency. If the house doesn't appraise out, you don't get your financing. It's a simple as that.

You are absolutely entitled for a return of your escrow deposit provided you notified the seller before the dates outlined in your Purchase and Sale Agreement.

Please let me know if you have further questions. I live in Northborough myself!
0 votes Thank Flag Link Tue Aug 2, 2011
I will have a mortgage. I cant use the finance contingency, because I can afford the larger downpayment. The mortgage broker is someone I can trust, unlike my soon to be former real estate agent, and has advised against attempting to use the financial contingency as a way out of the deal.

This is a case of sour grapes on the part of the seller and stupidity on my part for working with an incompetent realtor. I have an attorney in the family, who just sent over a letter with all the nec. legalize..
0 votes Thank Flag Link Tue Aug 2, 2011
Hi John,

It is not necessary to have an appraisal contingency if you have a financing contingency. If the house doesn't appraise, you don't get financing. It's as simple as that. You are absolutely entitled to a return of your escrow deposit, provided you notify the seller in writing within the dates in your Purchase and Sale Agreement.

Please feel free to contact me directly if you have further questions. I live in Northborough myself!

Judy Boyle
RE/MAX Signature Properties
0 votes Thank Flag Link Tue Aug 2, 2011
What kind of financing were you obtaining on the home? If it was FHA you have the amendatory clause automatically covers you in the event of a short appraisal.
0 votes Thank Flag Link Tue Aug 2, 2011

Are you financing? If so - the answer is simple with the seller because neither you or anyone else will be able to obtain the financing at the higher price.

Was your agent present at the time the appraiser went through the house? It's possible to argue the appraisal too. However - if the appraisal is correct - then you would be overpaying for the house. If you have a copy of the appraisal I would be happy to take a look at it for you.

The appraisal contingency should have stayed in the agreement.

0 votes Thank Flag Link Tue Aug 2, 2011
The normal process is that you would make the Purchase Agreement WITH the Appraisal Contingency, then the Bank would send an ACCEPTANCE with the Appraisal Contingency removed. You would have to sign it for the Property to go into Escrow. If you did not sign it, then you do not have a Contract.
If you did sign it, you cannot blame your Agent, the Bank or the Appraiser. You have a Contract!

Understanding that I am not an Attorney, and I cannot see the Docunents; you probably should see a Real Estate Attorney, (I understand that involving an Attorney is de rigor in Mass.).

Good luck and may God bless
0 votes Thank Flag Link Tue Aug 2, 2011

Are you getting a mortgage for this property? If so, was there a financing contingency in the contract? If so, you can walk away and get your earnest money back because you would likely be unable to get financing for a property that didn't appraise.
0 votes Thank Flag Link Tue Aug 2, 2011
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