Home Buying in Los Angeles>Question Details

Arodsvt, Home Buyer in Los Angeles, CA

Seller wants to back out cuz appraisal came in to low, i spent on appraisal and home inspection $1000 for

Asked by Arodsvt, Los Angeles, CA Tue Jun 16, 2009

both is there a way to get my money back, since seller pulled out

Help the community by answering this question:

Answers

39
Arodsvt, The apparaisal contingency is usually meant to protect the buyer from having to purchase a home that appraises for less than the contracted price because the banks will only lend based on the appraised value. There is always the ability to try to negotiate a new price, but the seller is not under any requirement to do so. The appriasal contingency does give the buyer the right to end the contract and receive their earnest money deposit back, but the other expenses they incur are not refunded because they paid for a service usually. Like the appraiser's work and the home inspectors report.
Web Reference: http://www.c21andy.com
1 vote Thank Flag Link Sat Jun 20, 2009
Arodsvt, congratulations on your purchase! I'm not sure whether or not I would have given them more $$$. However, if my heart was set on it I just might!

Patty, let me clarify something. I was saying that a smart seller would get the home inspection done before putting the house on the market. I wouldn't waste my money on an appraisal beforehand. An appraisal shows the value of the property that day and time. That is subject to change. As a seller, I would have my agent runs the sales comps frequently so that I would know what the sales price of other homes in the area had been.

It sounds like you've run into some unscrupulous people - perhaps agents. That is too bad and I'm sorry that happened. Most agents I know do NOT put themselves first in a transaction - they can lose their license for that and their livelihood would be gone.
Web Reference: http://www.DotChance.com
1 vote Thank Flag Link Thu Jun 18, 2009
Not sure if you're a professional home buyer but everything you mentioned should have been the job of both the listing and selling agent. After all they are the professionals that deal w/ this on a daily basis. Some agents are in a rush to get the deal that they don't do as much consulting or teaching. Running what if scenarios is always best to do w/ an agent as a buyer or seller.

Remember that your deal isn't dead but have your agent sit w/ the listing agent and try to figure out a win-win scenario. That might even mean that they both agree to a reduction in commission to make it easier on the seller.

Good luck.
1 vote Thank Flag Link Wed Jun 17, 2009
But you didn't get what I said. You cost the seller time and possibly the sale of the home to any of the other offers on the house. You basically won a bidding war but don't want to pay what you offered. What do you think would happen if you did that at an auction? Again, I'm not an attorney, but from what your saying and admitting to, the seller should have every right to keep any and all deposit money that you might have put on the property. As someone said before, there was nothing "good faith" about your offer. You tried to manipulate the sale in your favor.
1 vote Thank Flag Link Wed Jun 17, 2009
Hello Arodsvt and thanks for your question.

Unfortunately, this new HVCC ruling has caused many of our best appraisers to become unemployed, while allowing appraisers who are not as familiar with a specific area to make value judgments on the homes there. The result--appraisals that are often below market price for homes. You are not the first buyer to find the appraisal price lower than the list price, and, with the new HVCC, you will, undoubtedly not be the last.

As the others have already mentioned, a purchase agreement is sales contract in which all terms, including the cost of the inspections and the sales price are carefully delineated. In fact, there will be a section in the standard CAR contract noting which party will pay for investigations and appraisals. The practice in California is that the buyer will pay for the cost of investigations on the home unless the seller has already completed those reports. Should the contract terminate, for any reason, then the buyer has paid for the investigations at his/her own cost without possibility of remuneration from the seller.

Regarding the sales price, obviously, you and the Seller have agreed to a price. If the appraisal comes in lower, there are two choices that both parties can make:

1) The buyer can choose to put in more downpayment money in order to make up for the difference between the appraised value; OR
2) The buyer can chose not to go forward with the terms of the current contract, and ask the Seller to reduce the sales price to meet the value of the appraisal. If this happens, you are, essentially, terminating the first contract and changing the terms to request a reduction in price. At this point, the Seller does NOT have to agree to the reduction, so the Seller may (as you are currently seeing) pull out of the contract.

While I understand your frustration, the Seller may choose to sell his home for any amount of money, and may, similarly, choose not to sell his home if the price is less than the agreed upon price. While you may deem this greedy, it is the Owner's option to determine when to sell and for how much.

I find it troubling, however, Arodvst, that you stated that you "knew" that the home would not appraise for what you offered, and it seemed that you were counting on the Seller's willingness to reduce the price for you? Buying propery has many inherent hurdles, but it's a lot harder to purchase a home when impediments (such ash failure to appraise) are purposefully added to your offer. Gambling that the Seller would be desperate enough to lower the price was risky, and since this did not happen as you had planned, please don't view the reimbursement of fees as a means to punish the seller because that may be a very limited battle.

Take a few moments to read your sales contract thoroughly before proceeding. If you still feel that you are entitled to cost reimbursement, this matter is best taken to the arena of small claims court here in California.

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA
1 vote Thank Flag Link Tue Jun 16, 2009
I usually dont make you guys watch videos ....unless it me. This will explaine a lot

https://www.thinkbigworksmall.com/public/showArchiveVideo/1/4909

Patrick
0 votes Thank Flag Link Thu Jun 18, 2009
Mr.P, Other/Just Looking in Arizona
MVP'08
i think some people misunderstood me, we wrote up an offer....appraisal was less, i knew, so we went to renegoitate from appraisal price....invester who owns props,etc...wanted more the apprasail i offered $5k more...he finally agreed after a couple days of thinking and his own agent and couple of other opinions from appraisers, wife said $5k wasnt enough she wanted $10k..., i said no, so we decided to meet in the middle....so as it stands...deal is for $257.5k........im paying closing, coming in with 3.5% and dishing out the xtra $7500......so i think everything is ok for now..., went i paid for appra and inspection my offer was accepted and signed off by seller with contigency that if home didnt appraise we would renegotiate.
0 votes Thank Flag Link Thu Jun 18, 2009
Patty it's very offensive to many Realtors for you to lump us all into the greedy category. Like in many industries you are always going to have a percentage that acts unethically. These people are the ones who get the most attention. Many of us do try to teach our clients and help them make a decision that is in their best interest. I'm not sure if you've read this complete thread but you will notice that the seller had multiple offers over asking price. The asking price was probably determined by the listing agent's opinion along with what the seller was willing to sell for. It is good practice for some sellers to do a home inspection of their own so that they can have the property ready to sell but I would still advise my buyer to get their own inspection done. An appraisal is just an opinion and even if the seller had an one done that doesn't mean the one the bank ordered would be the same. Once again the appraisal contingency is there to protect the buyer because if the property doesn't appraise then they would have issues w/ the loan unless they come up w/ the difference in cash. This is a very simple problem between the buyer and the seller and the amount of money put up by the buyer is a cost associated w/ buying a home, $1000 to avoid making a $270k mistake. Let's not forget that the buyer knew it wouldn't appraise for that amount so the transaction was not entered into in good faith.

You had an example of buying a car or someone else did. If you bought a used car you would look up the blue book value for that vehicle and make an offer. If the offer was accepted you would hire a mechanic to inspect the condition of the vehicle. This is the buyer's cost. If the mechanic returns the opinion that the car has to many mechanical issues and is not worth the offer price then it is back to the table to negotiate a new price. The seller doesn't have to agree to a thing or reimburse the buyer unless that was negotiated. If the mechanic tells the buyer that it's a great deal and the car is worth more the seller can't come back and say wait I want more $.
0 votes Thank Flag Link Thu Jun 18, 2009
Dot, as you said... a "smart" seller would get their property inspected and appraised prior to listing their property. Why in the world would you want to put an offer on a property or do business with a seller that is not a "smart" individual. It shows how willing they are to sell and make a legitimate transaction. I know this isn't the norm, but that is what a "smart" buyer would/should wait for... the "smart" seller. Unless you have the $$$ to do whatever is needed to get the property your heart desires and can not be without. In most cases, people are trying to get a great deal. I believe, no wait, I know it's the best way to eliminate issues as these and have both come out on top. Look for the seller that is ready to make a deal, not one that is twiddling their thumbs to make a little extra to do God knows what. Look out for you first, as no one else will. Not even your own personal "broker". Even they look out for themselves first. Whatever it takes to close and collect… if you don't believe, become one. It may not be what a broker thinks initially, but most can't help it in the long run. The majority are in the red these days… don't save the deal, walk away. Like I said, it may just be a blessing in disguise. Get yourself another agent too...
0 votes Thank Flag Link Thu Jun 18, 2009
Sounds like what happen here was that the seller used you to get his property appraised and inspected.
~~~~~~~~~~~~~~

This is another great example of why real estate agents are invaluable, and a real estate transaction is better handled thru intermediaries.
0 votes Thank Flag Link Wed Jun 17, 2009
Arodavt, appraisals are coming in low more and more. The listing agent should have been keeping up with the comparables in the neighborhood and worked all this out with the seller so that there are no surprises when the appraisal came in. Did your agent run the comps before writing the offer for you.

Patty, I can see your point but I doubt that the seller was trying to get these services for free. It is generally a cost for the buyer. A smart seller will get a home inspection before placing their property on the market but it doesn't happen often.

I hope you can save the deal. If not, move on to another property - there's a lot on the market right now.
Web Reference: http://www.DotChance.com
0 votes Thank Flag Link Wed Jun 17, 2009
One last thing, I bet if you offered the 10k over, they still wouldn't budge.... remember, a seller will do everything to make sure their home sells. There is always something waiting to be gained on the other side of the fence, if not, they would not be selling to being with. Good Luck!
0 votes Thank Flag Link Wed Jun 17, 2009
Sounds like what happen here was that the seller used you to get his property appraised and inspected. The only winner here is the seller. They may have not wanted to sell their property and thought, "let's see if anyone is foolish enough to call us bluff and pay for what we would need to pay for before listing our property". Wow! Sounds like who you are doing business with over in your realtors office is a bit undereducated in this field. You should never have to put in any of your money to put in a simple offer. Think about it, if the seller is selling, they will have crossed all of their t's and dotted all their i's to make their property sale. Why didn't the others who put in the offer pay to get the property inspected and appraised? I bet they wouldn't dare… there is always a catch. These sellers of yours are just "thinking" of selling. Any seller is still the "owner", until final doc.'s are signed that is. They can back out at any time for a mire fee. Sometimes the fee is quite large, but nothing is larger than losing out on your life investment...... your home.

Word of advice… do not let go of not one other cent to simply put in an offer. The stipulations and agreements come after, not before. Even after an offer of yours is accepted, don't pay any out of pocket fees. Trust me, if the seller wants to sell, you won't need to. The home you purchase will not be that difficult to come by, it will happen almost seamlessly. Just like anything else that is meant to happen. Also, they will lose out if they back out, not you. So put it all on them! Always….

Hey, this same information could come out of reading a few books and even speaking to some who you may think don't know much about this subject, but know more than you think! Think about it, but seriously, would you appraise a vehicle and inspect it prior to coming to a purchase agreement? I don't think so… every purchase has it different rules and guidelines, but the same thought process goes into every day life purchases. Especially those that are investments. These days, what isn't an investment. Most do not have the money nor the back-up to purchase that they would like. Take advantage of this time, it is to your advantage.
0 votes Thank Flag Link Wed Jun 17, 2009
the deal is not completely off butt the owner decided to deal w/5k over appraisal which i agreed too and i found out the greedy wife said no, so thats where im at with it............u believe this crap. she wants 10k over appraisal price.
0 votes Thank Flag Link Wed Jun 17, 2009
Mario great answer, now what the seller should have done is get the home appraised before he listed so he could have an idea of what a home that size would go for in a particular area, research is key, 2nd i should have put a stipulation in the contract stating if home doesnt appraise i get the home at appraisal price, and that was my mistake live and learn.....................that will be done on the next one, but sellers dont want to agree to terms like that cuz they know better.
0 votes Thank Flag Link Wed Jun 17, 2009
3 c's. Let's see you're the customer, the other homes on the market are the competition, and the seller is the corporation. It seems that there wasn't enough comparable homes and therefore the competition was light and therefore the corporation is holding out for more. You and the 2 other buyers made the seller believe that they can get more by bidding up the price. The seller is probably under the assumption that everyone acted in good faith and so believe their property is worth more. You have to look for a win-win scenario and that should be negotiated between the listing and selling agent or else you will have lost the $1000.
0 votes Thank Flag Link Wed Jun 17, 2009
some of you sound like a diamond seller.............remember the 3 c's.........the home is worth what the buyer says its worth..........lol
0 votes Thank Flag Link Wed Jun 17, 2009
No one answering your question is a greedy agent. We're offering our insight at no charge in order to educate the public and have well informed consumers. You say nobody would want the property but obviously you were and 2 others. Any multiple offer situation is high demand. I think you're looking for someone to justify the fact that you don't want to honor a contract and you have that right because you haven't signed off on the contingencies. I don't see any agent on this forum that is going to agree w/ what you are trying to do. Like many have said in previous posts that you did not act in good faith and you still spent the money on the appraisal and inspection hoping that they would reduce the price back down. I guess the seller is just a better poker player than you. You should seriously sit down and talk to your agent and listen to them. I have a feeling that they are also not telling you what you want to hear and therefore you're on this forum. Nobody is trying to mislead you but it seems like you either are failing to understand or refuse to understand that the seller doesn't have to do anything. That's why the tone on this thread is starting to change and some are starting to talk to you as if you were a child. By the way if I were greedy I wouldn't be in this field or even specializing in first time home buyers.
0 votes Thank Flag Link Wed Jun 17, 2009
Typically, the buyer will pay for Home Inspections and Apraisal since they are the ones responsible for finding out any potential problems with the home. It should not have been your responsibility to pay for those in the first place.
0 votes Thank Flag Link Wed Jun 17, 2009
If there were multiple people bidding, that equals high demand. Means multiple parties liked and wanted the home. It doesn't matter what type of home it is, how many bedrooms, how many baths. All that matters is that you and 3 other parties felt this home was what they wanted. So you all placed your bids and the highest one won. That's where the story should end. But in your case it doesn't because all of a sudden, you don't feel the home is worth what you offered. So hopefully the next highest offer is still interested in the home and the seller can still sell his house to them. I don't even know why you're bringing up commission. $10K doesn't change all that much in what an agent makes.

A home is not worth what an appraisal says, a home is worth what a person is willing to pay for it.
0 votes Thank Flag Link Wed Jun 17, 2009
High demand, there is no high demand, silly, there were only 3 other offers besides mine thats all, like i said this home appplies to certain group only since its a 2-1 member tell me how many familys want to look at 2-1's, multi offers doesnt mean squat...the appraisal does, now you sound like a greedy agent ...to more money more commision, rite
0 votes Thank Flag Link Wed Jun 17, 2009
I think that you fail to see that you're argument is very one sided. What's fair to you may not be fair to the seller. The seller may be upset that you are also being greedy by asking for the seller to accept a price that is $20k less than the offer they accepted. Remember that an appraisal is a matter of opinion. Market value is determined by what the market is willing to pay for it. Appraisers aren't taking into account that there was multiple offers on this property and so isn't going to adjust the value on the fact that there was a high demand. Keep in mind that when the market is booming people pay above listing price and I'm sure that many appraisals came in low but because of the high demand people paid the price. Would you really pay more if the appraisal came in higher and the seller had already agreed to a lower price, no I don't think you would. So why should the seller agree to the lower price? The seller is fixated on a certain return and ultimately it's the seller's mistake if they don't get that return and values continue to drop but ultimately it's their choice and they might just decide not to sell. You keep saying that there's no way the property is worth what you offered but yet offered that price. It's best for you to walk away and stop feeling like you're entitled to the property.
0 votes Thank Flag Link Wed Jun 17, 2009
You should not offer what you are not willing to pay. If the seller went with the offer of 270K - whatever they wanted back and there were no other issues then he would be proceeding with the sale as normal. You say fair, but what you did was unfair. You beat out competition by offering more money, so you also took away their chance to buy the home. The seller accepted your offer because he thought that was what you felt the home was worth. The appraisal is only there to show the mortgage company that if you default on the loan they are covered if they need to sell. I've sold homes to buyers that were willing to pay more money than the house appraised for because they loved the home and they were willing to spend a little more.

If you want market value then that's what you should have offered and maybe someone else would have offered more and bought the home for what they thought it was worth. By making a higher bid, you secured your place at the top and that's what it was worth to you (10K higher than the guy below you).
0 votes Thank Flag Link Wed Jun 17, 2009
so guys are going another way...i said if the home appraised for wha i offerd i would have agreed but it didnt dont u guys get that, but since it appraised lower why cant i get the home, 2nd i was told i had the most cash in hand........everyone else need cash back for closing so forth i didnt........boy u guys dont get it........i want market value for this home period i should be granted that, so if it did appraise at $290 i would pay the 290 but that was not that case...i guess fair doesnt exist in the real estate market huh..............I didnt take his time im a serious buyer and i want fair value thats all i ask for, wouldnt u..........
0 votes Thank Flag Link Wed Jun 17, 2009
Agreed. Well said Lukasz.

Arodsvt, It was admittedly shady dealings on your part and now you have to pay the price for that. Did you have any monies in escrow? If the $1,000 appraisal fee is all you lost then be thankful. Honestly, put yourself in the Seller's shoes. The property may have been overpriced but you agreed to pay that price without the actual intent to follow through. You completely misrepresented yourself and your intention in a binding contract. That misrepresentation alone can null the contract whether or not you think its warranted. If I were the seller I may be inclined to seek damages most definately retaining any good faith escrow you may have placed at the time of your offer/signing the contract.
0 votes Thank Flag Link Wed Jun 17, 2009
Now your getting me i put the highest bid, like i said no one could match my price, the last price offerd was $10k large below me so my offer was very good, problem is its small home in ok area, many people in that area cant afford a home of this lil size with all that money, they might have 5-7 people in a home built for 2-3 peeps................but now u understand what i did, why wouldnt the seller just sell it at the appraised price huh...hes making bank already...............geez
0 votes Thank Flag Link Wed Jun 17, 2009
So what you're saying is:
1- You did your homework and were fairly certain that the home would not appraise at the offered price.
2- You placed a higher bid to beat out competition and essentially took the house off of the market, knowing that you would be reducing your bid.

Sounds like you played a game and lost :) The seller has every right to argue that you cost him time by taking the house off the market. What if another buyer came along that was willing to take a hit and pay a lttle more. Talk to your attorney but unless all parties were well aware of the fact that you would be reducing your offer once the appraisal came in, I don't think you'll get it back. Didn't you put a higher than asking offer to be the one that gets picked over the others?
0 votes Thank Flag Link Wed Jun 17, 2009
when my offerd was made, i would have paid it if it appraised but it didnt so why should i stay if it didnt appraise would, and now that we renogiated he still wants more would u be as greedy as the seller....think aobut it whats his profit margin on this...$164k bought, sold for $260k
0 votes Thank Flag Link Wed Jun 17, 2009
Now with more facts presented it is clear that you were not offering in good faith. You had no intention of paying what you offered. Consider it a very inexpensive lesson. Next time, offer what you are willing to pay and you will be much more successful. Best of luck to you.
0 votes Thank Flag Link Wed Jun 17, 2009
Looks like you were too clever by half when you signed into a contract without goodfaith to deliver your offer.

You created this situation.
0 votes Thank Flag Link Tue Jun 16, 2009
The only reason i made such a high offer was that they can only pick one and i was competing with others, i know the market and the conditions, so i knew it would not appraise the area doesnt call for just by looking at the comps my idea being once being high bidder and getting into escrow i would renegotiate with the seller for the home and work from there but nobody in this area is a cash buyer or will offer what i offerd its not feasable ....2-1 doesnt apply for a broad range of buyers...its limited to certain buyers thats why....i knew he could pull out but getting someone to pull from there pocket an extra 10k- 20k so the seller can put towards his next investment...................foolish if a buyer did that......
0 votes Thank Flag Link Tue Jun 16, 2009
My thing is regardless if i get the house or not....it will not appraise for any more...5600 sq ft lot 1008ft home 2-1 appr. $250k, comps in the area are way less than that.....but because there are some upgrades they did take that into account......but if he wants to hold on to it..........then he can shove it u know where..............
0 votes Thank Flag Link Tue Jun 16, 2009
I understand your frustration but your agent should have explained that this is a contract. You made an offer for more than what the property is worth in order to beat out other offers and it sounds like you had the intent to reduce your offer once the appraisal came in lower. This is contract law and in my opinion the seller only has to honor the contract that was signed. You are trying to amend the contract and if the seller doesn't agree then it sounds like you have two parties that can't remedy the issue. I suggest you check w/ a real estate attorney if you really want to demand reimbursement.

Mario Villagran
0 votes Thank Flag Link Tue Jun 16, 2009
I want the seller to reimburse me, thats what i want........when i made the offer i knew the home would not appraise cuz of market conditions and location and sq ft... so $250 is a legit offer he is just being greddy.....think about it $164 he paid, he invested 20-30k large....he is still going to profit......why should i lose the lil money i have cuz he wants deeper pockets....i want the money back from him cuz he's pulling out that what................
0 votes Thank Flag Link Tue Jun 16, 2009
Unfortunately an inspection is your cost and will not be refunded by the inspector. It is done to protect you from anything that may be a hazard or in need of repairs. The appraisal is an expense to you and some lenders on the rare occasion will refund it back to you but don't hold your breath. The appraisal is required by the lender in order to protect their interest which is the property that secures the loan.
The seller has just decided to not honor the value that the appraiser came up with. That's probably because there was multiple offers and they feel that they can get a higher price. When an appraisal comes in low some buyers will actually choose to come up with the difference. I never recommend this but sometimes emotions take over or others see more value than what an appraisal might show. You have a binding contract if you decide to honor your offer price and come up w/ the difference. Talk to your Realtor and decide if that's what's best for you or consider the $1000 an expense that saved you from making a bad purchase and walk away.
0 votes Thank Flag Link Tue Jun 16, 2009
i have an agent im in calif. i do have a contract and seller agreed to $280 but if it didnt appraise we would have to renegotiate it. but im out the $1000 i know some here arent lawyers but just wanted to know if anyone had any expierence with somthing of this sort, thats all
0 votes Thank Flag Link Tue Jun 16, 2009
Where you working with an agent that was representing you? If so, have them give you advice for your state. If no agent, contact a local real estate attorney and see what they recommend. I can't give any legal advice and you need it.

When you made your offer was the offer accepted? Do you have a signed contract to purchase the home? What does it say about the seller backing out? Lots of questions that need legal answers. Please keep us posted on the updates and best of luck to you.
0 votes Thank Flag Link Tue Jun 16, 2009
The loan approval and the appraisal price is still good...basically my offer $280k was competing w/other home buyers hence the price, list price home $260k, appraisal was $250k, now my loan is still good on $250 but seller wants to back out due to not making enough money on deal, he rehabbed home he bought it for $164k 2-1...1008 sq ft home but wants to be greedy. what should i do to get my appraisal and inspection money back
0 votes Thank Flag Link Tue Jun 16, 2009
Are you still able to get your financing with the low appraisal? What does your contract say that allows the seller to back out on the deal due to a low appraisal? Usually, it is the buyer that has the option to cancel the contract if the appraisal is not enough to get the loan. Not sure how the seller is able to do the same....
0 votes Thank Flag Link Tue Jun 16, 2009
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer