Home Buying in Huntington>Question Details

Lastunicorn21, Home Buyer in Huntington, NY

What if my appraisal comes in lower than the offer, but I have a large down payment? I want to be able to back out if the appraisal is to low. Can I?

Asked by Lastunicorn21, Huntington, NY Sat Nov 19, 2011

If the purchase price of the house is $375 and we are putting $100 down payment, and the appraisal only comes back at 350K, what is my recourse to get my escarow money back? My attourney says its subject to getting financing, but won't the bank still approve a mortgage with such a high down payment? Than I have no way to get my escrow money back. Who wants to pay 375 for house that only appraises for 350. And who wants to lose their hard earned escarow money. I asked my lawyer to put in an appraisal contigency clause in the contract and he won't do it. He said that's not how its done, it';s subject to mortgage approval. Is this typical in NY? Is is so bad for me to want the appraisal clause in there? Would the bank offer the mortgage because the loan would only be for 275k? How do I stay protected?? thank you

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Christopher Pagli’s answer
It's best to already have the appraisal as a contingency in the contract if you want to back out.

Christopher Pagli
Accredited Buyer Representative
Licensed Associate Broker
William Raveis Legends Realty Group
0 votes Thank Flag Link Mon Jun 3, 2013
Thank you all. I appreciate it. In the end I insisted my lawyer ask to have the clause in, and the seller was ok with it. So now I am protected and don't have to worry. Hopefully the appraisal will go well, and if it does come in too low, at least I have the option to negociate and if something can't be agreed upon, my deposit is protected. thanks again and have a happy thanksgiving.
1 vote Thank Flag Link Tue Nov 22, 2011
I think you really need legal advice. Although there are some really bright agents/brokers on this forum, this is really not the best place to obtain legal advice. Many attorneys will not give you legal advice unless they are retained by you. Many attorneys will not even speak with you since you are already represented. I suggest you ask your attorney for a clear and thorough explanation of his/her position. If you still disagree with him/her, then you may need to seek other legal counsel.

All the best!

Web Reference: http://www.bverealty.com
1 vote Thank Flag Link Tue Nov 22, 2011
The part about not including Contingencies; that is desirable to present a STRONG offer. Preferably we would make a CASH offer, with no contingencies, an As-Is purchase, with a 15 day Escrow. The Lawyers and Realtors involved would like to work these kind of deals.
But this is not a perfect world, and my primary concern would be protecting my client with Inspections and Contingencies: I don't feel that your Attorney is protecting you if he suggests doing without them.

The question about the Appraisal/$100/Loan should be shared with your Lender; you need their committment. This sounds like a very desirable Loan for them, so you shouldn't get any resistance.

Good luck and may God bless
1 vote Thank Flag Link Tue Nov 22, 2011
First off I would like to apologize for the previous answer you received. As a realtor we are always here to assist you with any questions you may have, and yours is a valid one. I recently had a transaction with this exact request where the purchaser asked in the contract to split the difference with the seller if the appraisal came in lower than the purchase price. Not all sellers are going to agree to this but your attorney works for you and should honor your request. If you are working with a buyers agent then she should be able to provide you with recent comparable sales in the area to help you determine fair market value.I hope this has helped a little . Good luck to you with your home purchase.
1 vote Thank Flag Link Tue Nov 22, 2011
Tom Mcgiveron, you are rude and quite arrogant. First off, I AM working with an agent. She's very good and has given me some advise, but there is never anything wrong with asking for more opinions.

Second, YES my typing was off and fast I have been suffering with being sick all week and pardon me for not being better about reviewing my typing. I have a BA from Fordham University and I consider myself a smart person. Being prepared and planning ahead is the SMART thing to do. Buying a house is a huge investment, I question anyone who would not be prepared and ask the right questions. Asking after the fact is stupidity.

EVERYONE---- I am not in contract, nor am I putting 100K down at contract, that one 100K comes in at closing for my down payment. I am putting in 12K in escarow AFTER we sign the contract. My lawyer gave me a hard time about putting in the Subject to appraisal clause and that is not sitting well with me. So I came here for advise BEFORE I sign. There has been no appraisal yet, no mortgage so although I appreciate some of the suggestions, this all has to do with what is customary on LONG ISLAND to put in a real estate contract. My lawyer thinks I may lose the house if we put that clause in, that banks don't give a mortage if the appraisal comes in lower. I've done my research and the fact is the bank CAN give you the mortgage, so long as the amount of their loan is covered, its up to the bank. Which it would be, because of the large down payment. Has anyone on LONG ISLAND seen this clause before and not for an FHA loan. (I would be doing conventional). I don't feel like subject to obtaining financing is protecting me enough. The appraisal needs to be put in there giving me the opportunity to re-negociate if it comes in low.

Thank you to the majority of you, who have been straight forward and read my post and follow up posts. Tom, I would never work with you based on how you answered. You have no tact.
1 vote Thank Flag Link Sun Nov 20, 2011
Hi, Have a mortgage contingency in the contract, that usually covers appraisal as well.

1 vote Thank Flag Link Sun Nov 20, 2011
You should talk with your Real Estate Agent and ask to renegotiate the price with seller, show your appraisal report as a proof. Also call your loan officer/ mortgage broker/bank to get the answer (try to get it in writing) and call your attorney. Good Luck..
1 vote Thank Flag Link Sun Nov 20, 2011
Hi Lastunicorn

Thanks for your questions and response below.

Prudent for you to write up a contract with an Appraisal contingency, otherwise walk from the property
And the attorney, if he cannot protect your interests.

Good luck.
1 vote Thank Flag Link Sat Nov 19, 2011
Hello Lastunicorn21,
Usually, an appraisal goes hand-in-hand with a mortgage contingency as it is your lender who orders the appraisal. If the property does not appraise at the sales price or above then you cannot get a mortgage approval.

My suggestion is to renegotiate the sales price with the seller if you truly want the home.

Good luck to you!

Laura Feghali
Prudential Connecticut Realty
1 vote Thank Flag Link Sat Nov 19, 2011
When you are dealing witb a contract and you are at odds with your attorney, I would recommemd a second opinion from a qualified R.E. attny.
1 vote Thank Flag Link Sat Nov 19, 2011
Absolutely get your money back if your Attorney and or Agent has this subject to an Appraisal! If they do not, shame on them!!
1 vote Thank Flag Link Sat Nov 19, 2011
When we write an Offer, we normally include 3 Contingencies; LOAN, INSPECTION and APPRAISAL:
If any of the three fail to come in as expected, then our Buyer has the ability to back out of the deal.

Good luck and may God bless
1 vote Thank Flag Link Sat Nov 19, 2011
In todays HOT market with many multiple offers on properties it would be harder to have such a clause because someone else does not. A appraisal is based on CLOSED sales in the ~ last 6 months (past HISTORY) for like properties, in a rising market it can be a issue. You need to talk with your BUYER AGENT and consider a change in your Team of professionals you are working with. Good luck.
0 votes Thank Flag Link Mon Jun 3, 2013
I am not an attorney but I would say that if you have a appraisal clause in the contract that about sums it up and you shouldn't worry. In some cases though due to the low inventory rate and demand. Homes that appraise for less in areas are not uncommon. This is a problem for the buyer and seller ask the Realtor to pull more comps for the Appraiser see if they can challenge the report to raise the value. However if there is no other options and you love the home then you may want to consider paying the difference as painful as that may seem.
0 votes Thank Flag Link Sat Oct 13, 2012
You can in fact get an appraisal contingency clause written into the contract, I worked with an attorney in New York. Adam Sutton who has done this before, in order to protect our client. It's definitely in your best interest to do so as the bank would definitely approve the loan due to the high down payment I recommend you get another legal opinion before proceeding otherwise your escrow money is in jeopardy.

Marco Gomez
NYS Associate Broker
Keller Williams Landmark II
Serving Queens, Nassau and Brooklyn
0 votes Thank Flag Link Wed Nov 23, 2011
first of all - are you in contract. you are "putting down" "$100" - i assume you mean 100,000.

Couple of things - you're not putting that down on contract and if you are - that's WAY TOO MUCH MONEY to put down on the signing of a contract.

I can tell by your typing also - that you started off with a "If"...blah blah blah...and the appraisal only comes in at 350k"

So you're not in contract.

Okay - so you're basically thinking ahead and worrying about every detail.

Are you working with AN AGENT? If not - that's your first BIG mistake.

All the free (and good) advice you'll get on trulia will NOT help you mentally overcome your fears. You need a Realtor to help you - period, end of discussion.
Web Reference: http://www.tommcgiveron.com
0 votes Thank Flag Link Sun Nov 20, 2011
Your attorney can best advise as how not to lose your deposit; are you working with an agent, and if so, have you tried renegotiating the price with the seller...
0 votes Thank Flag Link Sat Nov 19, 2011
hi, to clarify, we have not signed any contract yet. We are suppose to do that next week. It is my goald to have the lawyer add the appraisal contingency clause, but he is giving me a hard time. I have no money in escarow YET. But I don't want to sign a contract that is soley based on being able to get a mortgage because I KNOW we can get a mortgage because the down payment is so high. I HOPE the house comes in at or above what the purchase prise is, but if not I want to be able to re-negociate with the seller and walk away with my money if the seller won't come down. I don't want to over pay for the house. Why is my lawyer acting like this is such an unsual request to have a contigency clause for appraisal??? I thought he is there to protect me, not get the house sold at all costs.... I'm the buyer and he works for me right? Is it unreasonable for me to want this in the contract before I sign?
0 votes Thank Flag Link Sat Nov 19, 2011
Unfortunately, attorneys write the contracts here in Long Island, not the Realtors.

I am assuming you are already in contract if the appraisal is being done, but you do not yet have your commitment.

This is mainly a question for a mortgage broker. Call Dominick Sutera (516) 655-2900 (he is one of my favorite mortgage brokers) and ask him the question.

You may also see if you can lessen the amount of cash downpayment therefore requiring the bank to deny the mortgage.

On the other side of the coin, if you love the house, you may still have the option to purchase. Ask your Realtor to run recently sold comps in the area; not every appraiser is local with access to everything needed.

If you run into a problem there, contact me and I will run some for you.
0 votes Thank Flag Link Sat Nov 19, 2011
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