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.
â€œWe 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.â€
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 Buyerâ€™s earnest money, paying a penalty, or having to bridge the gap of an Appraisal deficit â€“ and yes, even if itâ€™s in the purchase contract!
You CAN make up the whole Appraisal deficit (assuming when thereâ€™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.
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.
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. Donâ€™t expect to sign that counter offer under those terms and then say, â€œI had my fingers crossed behind my backâ€.
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?
Depending on the seller, he may grant extensions....but even if the extensions are granted, can you meet the other obligations?
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.