Home Buying in 78759>Question Details

jlindhenson, Home Seller in Austin, TX

We are selling our home and under contract. What if appraisal comes in low and buyer won't pay and option period has ended? Options? Rights?

Asked by jlindhenson, Austin, TX Sat Aug 10, 2013

Help the community by answering this question:


The Texas real estate contract clearly states the property must satisfy the lenders underwriting requirements. If it doesn't the buyer can walk away and receive a refund of their earnest money. Appraisal is an underwriting requirement. If I were you I would have your agent review the appraisal for errors or inaccuracies if none you may be better off to negotiate with the buyer. The next contract most likely will end up in the same place.
0 votes Thank Flag Link Thu Mar 5, 2015
Appraisals are not "pure science" and are not much more than an opinion based on sales data of recent homes in the vicinity...get a second opinion and have your agent send additional comps. -bobby
0 votes Thank Flag Link Tue Mar 3, 2015
If there is a third party financing addendum, appraisal would be an underwriting condition. Buyer can walk away if it doesn't appraise.
0 votes Thank Flag Link Fri Mar 7, 2014
you get to keep the option money but not the earnest money
0 votes Thank Flag Link Sat Aug 17, 2013
you get to keep their option money but not earnest money.
0 votes Thank Flag Link Sat Aug 17, 2013
this happens sometimes and it's not the end of the world or as dramatic as some think. Just keep poised and focused. At least this is something my clients are ready for regardless of whether I believe the property will appraise or not. So we are ready with options and not dwell on the problem. Do you have a realtor is my first question? If so where is he/she?
If not, we can certainly talk about any recourse you may have based on the structure of the contract.
The short version has already been answered many times over. If it doesn't appraise then either walk away or lower the price to below appraisal (I believe it should be 10% below) for banks now to approve that property. Other options are getting a secondary appraiser to come out to your home. This will delay the process but if you firmly believe based on SOLD COMPS '(0-90 days) you may have a leg to stand on. Beyond this, it's too much to get into. So if you're interested, i can meet with you and represent you, and either A) realistically reassess your asking price, or B) help you find a cash buyer who will not be tied to bank stipulations.

Felix UT- Grad, realtor
"My business is people not Real Estate"
c: 512-900-2690
e: alonzo.felix@gmail.com

0 votes Thank Flag Link Sun Aug 11, 2013
Your Realtor should be helping you through this and if you don't have a Realtor well then I guess asking Realtor's on Trulia is as good a second option as there is. The answers below are all helpful to you. Unfortunately, it is hard to tell you all your options without knowing anything about the contract. But you do have options to close the deal, just maybe not force the buyers hand.

Happy to help anytime.

Dan Burstain, Realtor
JB Goodwin Realtors - serving Austin for 40 years
0 votes Thank Flag Link Sun Aug 11, 2013
The buyer can walk away, and you start over, unless other provisions have been made in the contract.
0 votes Thank Flag Link Sun Aug 11, 2013
You've received some great information in the comments here. Best of luck for a good appraisal and smooth closing.
0 votes Thank Flag Link Sat Aug 10, 2013
Where is your agent? She should be able to give you advice.

In short, buyers can walk away from the contract since their lender will not approve the loan.

Susie Kay, Realtor®
United Real Estate
III Lincoln Centre, 5430 LBJ Freeway #280
Dallas, TX 78240


Servicing your real estate need is my priority!
0 votes Thank Flag Link Sat Aug 10, 2013
My contact info if you need help:

Gene Davis
Office: 512-899-9403
Mobile: 512-217-0687
"Always working for the client, before, during and after the sale"
iPhone in use;
Web Reference: http://www.genedavis.net
0 votes Thank Flag Link Sat Aug 10, 2013
I'll be brief and to the point. If your in this situation I would guess you're a for sale by owner or you have an inexperienced agent. When representing buyers in a deal like this I'd add provisions in special provisions that seller pays back all of their out of pocket incurred costs if seller doesn't agree to lower sales price to appraised value unless my buyer doesn't care about their money. Unless there are some extenuating circumstances about the market value of your home if it doesnt appraise, which is unlikely because unless youre way off on sales price and appraised value, the appraiser would make it work because 30 % of the new market value is what ever a knowledgeable buyer and seller agree to.Tthis means, is it doesnt appraise, youre further apart than what you think. Now, for you, if you're only a few $k off, I'd suggest lowering the sales price; you can ask for another appraisal, but it could be worse. If you get in a bind, Your best option is to call someone like me who has the experience to fully explain all your options.
Good luck, Gene Davis "always working for the client, before, during and after the sale": 512-217-0687
0 votes Thank Flag Link Sat Aug 10, 2013
If the appraisal comes in low and you want to figure out how to keep the agreed upon contract sales price, your Realtor does have a few options:
1) Have your Realtor contact the Agents of all pending listings similar to your house that may sell at higher prices than current sold comps. Find out when they are expected to close and track their status in MLS. If any close near the time appraisal is completed, send them to lender to be sure they are not missed.
2) Your Realtor can check all recent solds (within past 6 months) and see if any support your sales price. If so, send these comps to the Buyer's lender with detailed explanation (i.e. distance to subject property, similarity in condition, etc). The lender is required to send this information to the appraiser. It is possible the appraiser could have overlooked an important comp and if it gets included, it will raise the appraised price.

Assuming the Buyer is financing the purchase, the contract states Buyer has right to terminate if lender's underwriting guidelines (including appraisal) are not met. In my experience, most Buyers will not walk away from the deal but they will take a lower price. Unfortunately it takes time in a seller's market for the appraisals to catch up to current selling values since they are based on past solds. Best of luck to you!

Tammy DeWitt Le
Horizon Realty
(512) 773-3214
0 votes Thank Flag Link Sat Aug 10, 2013
First off lets specify that all this comes into play only after the option period is over. Well the appraisal isn't the only factor in allowing the buyer to walk away. You need to speak to your agent but you can't just walk away from a contract if the appraisal comes in lower than the contracted price. You really need to look at the contract closely and at how much the buyer is mortgaging and the lenders required loan to value. The third party financing addendum states if they cannot get approved and the terms of the loan that they require. The only time it mentions the appraised value of the house is if it is FHA.

If the option addendum doesn't have FHA financing it is very possible to get a loan approved for a house that had an appraisal come in lower than the appraised price. You usually can achieve this because of a larger down payment.

The lenders only care if the house is worth enough to cover the value of their loan. They don't specify how much you can pay for a house.

Here is an example

Contract Price Home: $120,000
Appraisal Price of Home: $116,000
Down Payment: $20,000
Loan-to-Value: 86% (meaning the loan is only 86% of the total value of the house)
Contract Addendum interest rate: 5.4%
Actually Interest Rate: 5.2%
Loan Status: Approved

In the example above you couldn't just back out of the contract because you didn't like the appraised value of the home. The buyer would forfeit their earnest money. Unless it was specified that the house couldn't appraise for less than 120,000. Which most people don't state in the contact.

Hope this helps.


Chris Hutchinson
The Michael Group
0 votes Thank Flag Link Sat Aug 10, 2013
If there is a third party financing addendum, appraisal would be an underwriting condition. Buyer can walk away if it doesn't appraise.
0 votes Thank Flag Link Sat Aug 10, 2013
Your Realtor should be assisting you with all your questions. No lender will approve a mortgage on overpriced home. Either you would require reduce the price for appraised value or remove from the market till value increases where you can sell the home.

Terms and conditions are based on executed sales agreement

Lynn911 Dallas Realtor & Consultant
Multimillion Dollar Sales Producer
http://www.lynn911.com 100's of Dallas homes listed for sale or lease

Follow me on Facebook and Twitter

(If my answer is helpful indicate by THUMBS UP or BEST ANSWER. Thank you )
0 votes Thank Flag Link Sat Aug 10, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Home > Texas > Travis County > Austin > 78759 > Home Buying in 78759 > Question
Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer