No lender will allow any buyer purchase a home overvalued. Listing agent should work with seller notify them of problem in order sale home OR keep it .
Never pay more for anything, unless VIEW ocean, golf course, etc. however approval for a loan would not happen.
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Your best bet is to renegotiate the contract based on the appraised value. Either side could have another appraisal done to confirm either the sale price or the appraisal price. Chances are the second appraisal will come in around the same price as the first appraisal. I have seen where the second appraisal has been lower than the first as well.
Bill is right regarding the lender. It's doubtful that the lender will approve the loan. Lenders are getting tighter and tighter on loans. They are only going to loan you a certain amount. You would have to come up with the difference in cash to keep the deal together in order to close next week.
In Illinois your contract should have a stipulation in the financing section stating something to the effect that the property needs to appraise at or higher than the purchase price. Appraising lower is a way to opt out of the deal .The reality is if the seller wants to close this deal they are going to need to reduce the purchase price. Your attorney should handle this part for you.
You lender is unlikely going to be willing to finance this property. The fact of the matter is this is a significant amount....one that the seller is going to have to accept either on this offer or the next if the numbers do not come in.
Banks are doing everthing they can to take a more conservative position on lending.....requesting a second appraisal is a possibility but before taking that route it may be beneficial to have a discussion with your lender to see how they will deal with a second appraisal that comes in at the sale price.....and if possible, get it in writing.
The Eckler team
In most cases where I have had an appraisal to come in lower than the accepted price on the purchase contract the seller has re-negotiated the price. At times, they will request a second appraisal just to be able to compare, however, they usually come in pretty close to whatever the 1st one came in at. You should notify both your real estate agent and your attorney and provide them both with a copy of your appraisal. Typically, your attorney will do the re-negotiations with the seller's attorney for you, however, there are times when the real estate agents are involved. You should never pay more than what a home is worth, especially in a declining market. The seller understands that this is not something you have control over and should be willing to negotiate, however, be ware, that if they come down on the price and they were contributing anything to closing costs, they will probably try to renegotiate that end of the bargain as well. Good luck. Hope that was helpful!
PanAmerican Mortgage, LLC
Senior Mortgage Consultant