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.
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.
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.
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA
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 $.
This is another great example of why real estate agents are invaluable, and a real estate transaction is better handled thru intermediaries.
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.
Word of adviceâ€¦ 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! Alwaysâ€¦.
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 soâ€¦ 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.
A home is not worth what an appraisal says, a home is worth what a person is willing to pay for it.
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).
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.
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?
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.
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.