Home Buying in Union City>Question Details

Joy, Home Buyer in Fremont, CA

Can i still get back our deposit if we cancel the transaction since we cant put up the funds for the diff between the appraised value and purch price?

Asked by Joy, Fremont, CA Fri Jul 12, 2013

Our offer to purchase was accepted by the seller last July 11th. We are still contemplating if we will sign the counter offer because I'm afraid that the apppraised value will be lower than the purchase price. I am only applying for an FHA loan, thus, i have no extra funds to put for the difference. If i back out based on this reason ,can i still get my deposit if I sign the counter offer with the following conditions:

1. loan contingency to be 12 days
2. appraisal contingency to be 10 days
3. all inspection & reports to be removed in 7 days
4. buyer to pay the difference if the property value be lower than the purchase price.

Granting that there is no problem with the appraisal, what will happen if we cannot meet the number of days for the loan and appraisal contingency? Will the seller has the legal basis to cancel the contract and forfeit our deposit or impose some penalties?

Hope somebody can give me an expert advice. I'm just confused ..

Joy

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Answers

12
Joy, I understand after other failed offers, you finally have a counter offer from a seller.

Based on what you've shared, you have protections in place. It's a competitive market and while you don't like item #4, unless the seller is willing to remove it, you need to choose. Has your agent asked to strike that item? Has the seller refused?

Either choose to absolutely lose the house by not accepting the counter or choose to take a chance on actually getting the house with the negotiated protections in place.

Is there really a risk of the home not appraising at purchase price? What are the comps?

There are no absolute guarantees. Pray to know the right action, then do it.
0 votes Thank Flag Link Wed Aug 28, 2013
Hi Joy:

“We are still contemplating if we will sign the counter offer because I'm afraid that the appraised value will be lower than the purchase price.”

FHA requires an Amendatory Clause be made part of the purchase agreement, which you can see at http://docs.Steven-Anthony.com/FHAAmendatoryClause.pdf .

As you will read, the FHA Amendatory Clause and Real Estate Certification changes a few things; such as, protecting against the forfeiture of the Buyer’s earnest money, paying a penalty, or having to bridge the gap of an Appraisal deficit – and yes, even if it’s in the purchase contract!

You CAN make up the whole Appraisal deficit (assuming when there’s extra funds), negotiate with the seller to arrive at a mutually agreed purchase amount, or cancel the transaction.

The Amendatory Clause is NOT required for HUD REO sales, sales where the Seller is Fannie Mae, Freddie Mac, the Department of Veteran's Affairs, Rural Housing Services, other Federal, State and local government agencies, mortgages disposing of REO assets, or sellers at foreclosure sales and those sales where the borrower will not be an owner-occupant.

Good luck with your purchase.

-Steve
0 votes Thank Flag Link Mon Jul 15, 2013
Thank you very much for taking time to answer my questions. It actually supports the explanation of my agent. We submitted the signed counter offer last Monday and the seller already signed it with the FHA Ammendatory clause.

I can sleep better now..thanks again and I hope this transaction will proceed within the time periods given to us so that we will have a new home...

joy
Flag Wed Jul 17, 2013
Hi Joy,
To reaffirm some of the previous responses:

Yes, while within your contingency period(s), you can cancel the contract AND get your deposit back.

That being said, your time periods for appraisal/loan contingencies are a bit short for an FHA loan, but technically do-able. Your lender may be quick and responsive, but appraisers can be a weak link in this time-table.

Additionally, ask your agent about the FHA Amendatory Clause. FHA requires this document be signed by buyers and sellers in the course of the transaction. This document definitely impacts the appraisal/loan contingency language you signed in the counter offer.

Michael.
0 votes Thank Flag Link Mon Jul 15, 2013
Thank you for taking time to answer my questions. Yes you are right ,we got a 90% commitment of the lender to meet the time periods.

We have attached the FHA Amendatory clause in our signed counter offer to the seller. As explained to me, it will somehow give the FHA buyer some kind of protection.

The additional info that you gave me makes me feel more comfortable now. Thanks again.
Flag Mon Jul 15, 2013
Condition #4 in your question is a deal-killer in my opinion.

If you cannot make up the difference when the appraisal falls short the seller will expect to claim your deposit. That is why that is in there. Don’t expect to sign that counter offer under those terms and then say, “I had my fingers crossed behind my back”.
0 votes Thank Flag Link Sun Jul 14, 2013
Thanks John for your reply. Now I'm worried since we already signed the counter offer and submitted to the seller this am. As per our agent, we can still recover our deposit if we back out within the 12 day period given to us by the seller. What i will lose is the appraisal and inspection fees..
Flag Mon Jul 15, 2013
As long as you do not remove the contingencies in writing, you should be able to get your deposit back.
0 votes Thank Flag Link Sat Jul 13, 2013
Thanks Brian for your reply. I'm so sorry but I just want some clarifications if i get you right, do you mean if i sign the counter offer with the conditions i have specified in my original question and i will back out before the lapse of the period given to us, so i can still get back my deposit.
Flag Sat Jul 13, 2013
Thank you for taking time to answer my questions. I should make a decision today whether to sign the counter offer or not. This is critical for us since we already made 12 offers and this is the first seller who gave us a counter offer.

I have been discussing the matter with our agent and lender. I also made my own research and read the details of the purchase agreement because i don't want to lose money for the appraisal and the inspection fees or worst our deposit. It's not that i do not trust my agent but i just want to know opinions from other experts.

The lender actually committed to meet the 10 days for the appraisal and 12 days for the loan approval but with all your comments i am apprehensive now if it is doable. So the big question now which I hope you can answer is , if we cannot meet the conditions of the seller on the loan and appraisal contingency or the appraisal value will be lower than the purchase price can ,i still back out and get our deposit?
0 votes Thank Flag Link Sat Jul 13, 2013
Listen to John, he gives you excellent advice. I am with him and am concerned that you are not mentioning an agent. The terms you have been given would be difficult for a conventional loan let alone a FHA loan. You have little control over the appraisal being done in that amount of time because it will depend on how busy the appraisor is. I would be very concerned over these terms. Good luck
0 votes Thank Flag Link Sat Jul 13, 2013
The loan contingency of 12 days is very aggressive for a conventional loan. IMO, not doable for a FHA loan.
Good luck,
0 votes Thank Flag Link Sat Jul 13, 2013
You need to talk to your lender and find out how much time they need to process your loan, I would doubt that any lender is going to meet these deadlines with an FHA or even conventional lending.
0 votes Thank Flag Link Sat Jul 13, 2013
The expert advice you should get should be from your agent who helped you write the offer. If you have no confidence in his/her ability, ask to speak with his/her broker because these are questions best addressed to your agent who can provide counsel.

Depending on the seller, he may grant extensions....but even if the extensions are granted, can you meet the other obligations?
0 votes Thank Flag Link Fri Jul 12, 2013
There are contingencies in the contract for a reason. And extensions are available most if the time.

I agree with John.
0 votes Thank Flag Link Fri Jul 12, 2013
You have been given a very aggressive counter offer. I would be surprised if you can meet all of the terms that you are being asked to accept.

Don't you have an agent? I hope you do. At the same time I worry that you value the opinions of a diverse number of strangers from the Internet over that of your agent. If you want a second opinion you should ask your agent to get the Broker involved. If you are using the seller's agent you are making a mistake.
0 votes Thank Flag Link Fri Jul 12, 2013
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