Home Buying in Palm Springs>Question Details

TedM, Both Buyer and Seller in California

Contract dilemma - What is the price of the house?

Asked by TedM, California Wed Jan 30, 2013

House listed in Cathedral City, Calif in Oct 2012 for $225K. One week after listing date, buyer offered $231K with FHA financing using a Real Estate Purchase Agreement (RPA) without an addendum. There were 6 offers over listing, so sellers asked for Best & Final.

Two weeks after listing date, during the Best & Final process, the same $231K buyer, via an email from his agent, increased offer to $235K with FHA financing.

However, after Best & Final process, sellers chose an all-cash buyer at $225K. One week later, all-cash buyers back out.

Sellers then went back to the highest offer at $235K. The buyer's agent processed a new RPA increasing offer price from $231K to $235K and added an addendum stating "If property appraisal comes in lower than agreed purchase price of $235K, then buyer will pay the difference between the appraised value and agreed purchase price up to a maximum of $3,500." Both parties signed RPA before appraisal.

Four weeks later, the appraisal came in at $206,000.

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Answers

11
What are your fico scores and how much you have to invest into the down payment and closing costs? If you have a minimum 620 fico score, you may qualify for conventional 5% down with NO Mortgage insurance (Lender paid MI) If you have a minimum 700 fico score, you may qualify for 3% down conventional financing. If you have fico scores close to a better financing option, I can raise fico scores within 3-4 days in most cases. to qualify for programs, rates and terms as necessary...

It all depends on what your fico scores are and how much you have to invest as to what options you will have with financing choices? It only takes a few dozen questions to go over your contract and credit profile to figure your options...

http://www.under640ficoscoreloans.com/Pages/Conventional.aspx

http://www.under640ficoscoreloans.com/Pages/FHA.aspx

http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
9am till 9pm 7 days
http://youtu.be/MrygA2_8fAY
0 votes Thank Flag Link Fri Feb 1, 2013
We are the sellers. I appreciate your advice -- I wish you could contact the buyers and tell them all of this! It's become a contract dispute. Please re-read the series of events in the question. We see nothing in the addendum that means we HAVE to sell the house to the prospective buyers for 209,500. But the prospective buyers are dragging this out. They wanted Mediation - so we obliged and mediated last week. They 'went up' to 215K and we 'went down' to 225K. There was no resolution and I don't see why I have to! Now they are requesting Arbitration. We feel like our hands are tied and we HAVE to do all this nonsense when this is a non-issue... there is no THERE there. What a mess... Any advice?
Flag Fri Feb 1, 2013
Is there any chance that you may switch it from FHA to Conventional with 5% down? There may be an opportunity for both parties to win. If you were to change it to conventional, then you may need a brand new appraisal. The new appraisal may come in higher than your FHA appraisal did. What is so different from this property to other comparables? Is it in a track of homes or is it a custom home or a home where there are no real comparables? From a lender's point of view here is the problem. This happens more often than not. Since the new HVCC laws and now the Dodd-Frank laws took effect, lenders have lost the ability to reach out to the appraisers. In fact, all lenders are required to use an AMC (Appraisal Managment Company) when ordering appraisals. The problem with this is that when you have a property that needs some detail knowledge of the comparables or of the current market, as a lender we have not control as to who will actually show up to conduct the appraisal. Appraisers from out of town take on assignments in markets that they have no knowledge in or if its a custom home, that is the worse. So what was designed to help and protect the consumer, although well intentioned, is not always the case.

If you need a second opinion, give me a call. I would love to help you sort through all this. 951-210-2101.

I work for a direct lender headquartered in Irvine, California. Feel free to look me up at the following websites.
http://www.impacmortgage.com/edeleon
http://www.facebook.com/LoansByEddie
http://www.linkedin.com/in/eddiedeleon

Thank you for looking. I look forward to hearing from you.

Respectfully,
Eddie W. de Leon
951-210-2101
NMLS #238369
0 votes Thank Flag Link Fri Feb 1, 2013
I appreciate your advice- I have a question about Appraisals. It seems as though when this particular appraisal was done, the appraiser had access to the info in the addendum (see question above). Should an appraiser be privy to such contractual info? [It is my belief the buyer's agent supplied the appraiser that specific contractual info to get a lower appraisal.]
It's become a contract dispute. Please re-read the series of events in the question. We see nothing in the addendum that means we HAVE to sell the house to the prospective buyers for 209,500. But the prospective buyers are dragging this out. They wanted Mediation - so we obliged and mediated last week. They 'went up' to 215K and we 'went down' to 225K. There was no resolution and I don't see why I have to! Now they are requesting Arbitration. We feel like our hands are tied and we HAVE to do all this nonsense when this is a non-issue... there is no THERE there. What a mess- Any advice?
Flag Fri Feb 1, 2013
$209,500 - Would be the current "Contract" price.
0 votes Thank Flag Link Thu Jan 31, 2013
We are the sellers. We see nothing in that addendum that means we HAVE to sell the house to the prospective buyers for 209,500. BUT, nonetheless, the prospective buyers are dragging this out. They wanted Mediation - so we obliged and mediated last week. They 'went up' to 215K and we 'went down' to 225K. There was no resolution and I don't see why I have to! Now they are requesting Arbitration. We feel like our hands are tied and we HAVE to do all this nonsense when this is a non-issue... there is no THERE there. What a mess... Any advice?
Flag Thu Jan 31, 2013
I should have been a little clearer with my question:
After reviewing the facts of the situation, what do you think is the current contract price?
0 votes Thank Flag Link Thu Jan 31, 2013
Your contract price could be null and void if the seller wants to net more than what this particular appraisal came in at. The seller could net more with putting the home back on the market unless you figure out what options you have available to you right now and act quickly. What type of sale is this, standard sale, REO or short sale? Time is of the essence. Let me know if I can be of any assistance.
http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
9am till 9pm 7 days
http://youtu.be/MrygA2_8fAY
Flag Fri Feb 1, 2013
Ted,


You must be very frustrated with this situation. I am sorry you are having to go through this. However, the market is rapidly changing. You got some very good advice on here. The question you posed is what is the value of the home. Value is usually determined by what a willing Seller and a willing Buyer agree on a price. Yet, in real estate there are external factors that must be dealt with.

The options are:

- Communicate with appraiser - get new comparables to substantiate the price. Make a good case for value. There is a chance you may get the appraisal changed.
- Seller reduces price.
- Buyer pays the difference.
- Seller and Buyer would need to both come together.

Scott Newton - Broker
760.898.4496
0 votes Thank Flag Link Thu Jan 31, 2013
Hello Ted, the FHA appraisal stays with the property for minimum 4 months so you need to get your agent working on the comparable to substantiate your offer to even have a chance. The seller is going to put the home back on the market as they can get more than the $209,500 with other buyers offers that aren't FHA. There are still other financing options they can consider.

Your only option is the rebuttal and you have to act fast unless you want to risk going in at the angle of having the seller drop the price which is possible but very risky if you want the home? If the seller remarkets the home you will completely be out of the picture with an FHA offer...

Let me know if you or your agent need instruction to get in the rebuttal to dispute the appraisal but your agent needs to gather the comparables together. I have won rebuttals and know what is needed and how to substantiate the rebuttal. Good luck to you.

http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
9am till 9pm 7 days
http://youtu.be/MrygA2_8fAY
0 votes Thank Flag Link Thu Jan 31, 2013
I should have been a little clearer with my question:
After reviewing the facts of the situation, what do you think is the current contract price?
Flag Thu Jan 31, 2013
From what you have said the price is $209,500 The appraised value plus the max $3,500 over.
0 votes Thank Flag Link Thu Jan 31, 2013
Are you sure? We are the sellers. We see nothing in that addendum that means we HAVE to sell the house to the prospective buyers for 209,500. But the prospective buyers are dragging this out. They wanted Mediation - so we obliged and mediated last week. They 'went up' to 215K and we 'went down' to 225K. There was no resolution and I don't see why I have to! Now they are requesting Arbitration. We feel like our hands are tied and we HAVE to do all this nonsense when this is a non-issue... there is no THERE there. What a mess... Any advice?
Flag Thu Jan 31, 2013
Since the appraisal does not meet any of the specified terms of the agreement, and exceeds the $3,500 maximum limit, it would appear that these parties would find themselves back in the negotiation stage again.

The contract price of $235,000 is not an appraisal supported price.

Bill
0 votes Thank Flag Link Thu Jan 31, 2013
We are the sellers. We see nothing in that addendum that means we HAVE to sell the house to the prospective buyers for 209,500. But the prospective buyers are dragging this out. They wanted Mediation - so we obliged and mediated last week. They 'went up' to 215K and we 'went down' to 225K. There was no resolution and I don't see why I have to! Now they are requesting Arbitration. We feel like our hands are tied and we HAVE to do all this nonsense when this is a non-issue... there is no THERE there. What a mess... Any advice?
Flag Thu Jan 31, 2013
Best bet is to approach the seller for a reduced price. Since you are operating with an FHA loan, you really need the home to appraise. This is not uncommon in a rising market.
0 votes Thank Flag Link Wed Jan 30, 2013
Robert, We are the sellers. The prospective buyers are forcing us to sell them the house for $209,500. We see nothing in that addendum that means we HAVE to sell the house to the prospective buyers for 209,500. But the prospective buyers are dragging this out. They wanted Mediation - so we obliged and mediated last week. They 'went up' to 215K and we 'went down' to 225K. There was no resolution and I don't see why I have to! Now they are requesting Arbitration. We feel like our hands are tied and we HAVE to do all this nonsense when this is a non-issue... there is no THERE there. What a mess... Any advice?
Flag Thu Jan 31, 2013
Speak with your agent whom advised the $231k offer as I am sure the there has to be comparables to even submit an offer up to that price. The seller can call off the deal completely but there is also appraisal rebuttals and submitting the comparables to back up and sustantiate the 231k price. It is not uncommon for the buyer to pay slightly over the market value which is the $3,500 over market value. Get your agent involved with the rebuttal and see if you can save the deal or walk. I have won a few rebuttals that way. The appraisal sounds like it needs all new comps and that the appraisal is using like for like properties. You better hurry as there is a limited time to complete the rebuttal process. Good luck and keep us posted.

http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
REO & Short Sale Specialist
Credit Repair At No Cost
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
9am till 9pm 7 days
http://youtu.be/MrygA2_8fAY
0 votes Thank Flag Link Wed Jan 30, 2013
Hi McLovin,

The purchase price is $235K - as the contract stands. Now, the buyer will only get the $206K financed. So, they would need to pay the difference of $29K in cash. However, they stated in the addendum they would only pay $3,500, not $29K. So, that said, the seller can lower the price to $209,500 or the buyer can cancel contract, or the seller and buyer can meet somewhere in the middle (but neither of them has to). The FHA appraisal of $206K will stay with the property for 6 months so if the current contract is cancelled and the seller accepts another offer, if it's FHA the appraised value will still be $206K so the seller would probably not want to accept another FHA offer if they want more than the $209,500 the current buyer is offering. An addendum will be needed to change the purchase price to the $209,500.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
0 votes Thank Flag Link Wed Jan 30, 2013
Shanna, We are the sellers. The prospective buyers are forcing us to sell them the house for $209,500. We see nothing in that addendum that means we HAVE to sell the house to the prospective buyers for 209,500. But the prospective buyers are dragging this out. They wanted Mediation - so we obliged and mediated last week. They 'went up' to 215K and we 'went down' to 225K. There was no resolution and I don't see why I have to! Now they are requesting Arbitration. We feel like our hands are tied and we HAVE to do all this nonsense when this is a non-issue... there is no THERE there. What a mess... Any advice?
Flag Thu Jan 31, 2013
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