Home Buying in Denver>Question Details

Francesca R.…, Home Buyer in Parker, CO

Why would a seller require a rush date on appraisal before approving a contract?

Asked by Francesca R. Berard, Parker, CO Mon Sep 10, 2012

The seller has agreed to closing in 30 days and our bid, it's just that he wants the appraisal done in 16 days or he won't approve the contract to sell. That just doesn't make sense? Can anyone shed some light on why a seller would be so adamant about this aspect of the contract? The house has been on the market for two and half months.

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Francesca,

There are a couple of reasons. 1st, to ensure that the purchase price appraises early and not wait until the last minute and the deal falls apart. 2nd, to move things along so that all things are in place for the loan conditions deadline. 3rd, the agent may have advised him to move things along quickly. On a 30 day closing it really is a good idea to get things taken care of early in the process. The inspection should be done asap and there is no reason not to do the appraisal immediately after inspection resolution. 3rd, some sellers want to feel that they have a certain amount of control in the process and also feel that when the buyer pays $450.00 for an appraisal it locks them in a little further having more 'skin in the game'. Finally, if you want this home there is no reason not to go along with this request. This is not the hill you want to die on.


Robert McGuire ASR
Broker/Consultant
Your Castle Real Estate
Direct - 303-669-1246
http://about.me/robertmcguire33
2 votes Thank Flag Link Mon Sep 10, 2012
Because currently a low appraisal value is one of the biggest problems to getting a home sold. If the seller accepts a contract, pulls the home from the 'active' market, and then a low appraisal comes in and they either have to lower the price, or put the home back on the market, they seller either just lost time or money or both.
2 votes Thank Flag Link Mon Sep 10, 2012
Most likely because they're insecure about the value of their house and they want it appraised quickly in the event it doesn't appraise for the contract price. That way they can get it back on the market without losing too much time off the market. If you're financing with an FHA loan there will be consequences for the seller however; the value will stick with their house for 4 months, and they will then only be able to offer conventional terms.
1 vote Thank Flag Link Tue Sep 11, 2012
I'm being polite here...Let's say they're ill imformed. Scared on the appraisal, or both. Industry standard for an appraisal is 3 + weeks out.
1 vote Thank Flag Link Mon Sep 10, 2012
Hi Francesca, Good answers below. Sellers do want to know value as soon as possible and it is common to have the appraisal deadline date a few days after your inspection resolution deadline date. If you are doing an FHA loan, you are covered whether the date has been met or not, as the language in the appraisal paragraph is very broad in the Colorado Real Estate Contract to Buy and Sell:
Paragraph 6.2.2 6.2.2. FHA. It is expressly agreed that, notwithstanding any other provisions of this Contract, the Purchaser (Buyer) shall not be obligated to complete the purchase of the Property described herein or to incur any penalty by forfeiture of Earnest Money deposits or otherwise unless the Purchaser (Buyer) has been given in accordance with HUD/FHA or VA requirements a written statement issued by the Federal Housing Commissioner, Department of Veterans Affairs, or a Direct Endorsement lender, setting forth the appraised value of the Property of not less than $______________. The 218 Purchaser (Buyer) shall have the privilege and option of proceeding with the consummation of this Contract without regard to the amount of the appraised valuation. The appraised valuation is arrived at to determine the maximum mortgage the Department of Housing and Urban Development will insure. HUD does not warrant the value nor the condition of the Property. The Purchaser (Buyer) should satisfy himself/herself that the price and condition of the Property are acceptable.

Basically, you do not have to pay any more than the appraised value or you get your earnest money back regardless of appraisal dates in the contract.

Hopefully you have looked at recent sold comparable properties and are comfortable with value as you don't want to go spending $300-400 on an inspection if the value is not there. I have actually asked the seller to pay for an appraisal before the inspection deadline and that the seller would receive a credit back from the lender at closing if the property came in at value. This has happened twice this year with clients.

Hope these things help!

Best Regards,

Paul Mooney 303-810-7280 direct http://www.paulsdenverhomes.com
1 vote Thank Flag Link Mon Sep 10, 2012
Thank you for the detailed assurance. We have a VA loan and we fully expected to try and rush as much of the necessities as we could. It was just that signing a contract to have something done in 16 days that we had no guarantee would happen in time seemed a bit shifty. My fear is breaching contract on our end for a third party's inability to keep up. What was truly fishy was that the seller is willing to not sell the home at all unless the appraisal is done within 16 days.
Flag Mon Sep 10, 2012
Low appraisals have been an issue every since the big mortgage "melt down". The seller wants to be sure the home appraises for the contract sales price sooner than later so as not to keep it off the market for a long period of time pending the outcome of the appraisal for your lender's purposes.
1 vote Thank Flag Link Mon Sep 10, 2012
In California our contracts have certain contingencies. Loan and Appraisal is one of them. Us listing agents like to see loan and appraisals removed in 14 days or less. Some sellers are asking for buyers to remove the appraisal contingency (which is risky to the Buyer).

The price, terms, and contingencies are all part of the contract. So if the parties do not agree to all parts then there is no contract.

The reason, as Stuart stated, is the seller wants to know that the buyer is going to perform sooner than later.

With the low interest rates lenders are bogged down and so are appraisers. I'm seeing appraisals take up to 15 to 17 days now. Having a tight time line will push the buyer's lender and the buyer to do what they need to do.

Have an amazing day!
Web Reference: http://www.terrivellios.com
1 vote Thank Flag Link Mon Sep 10, 2012
Francesca:
1. what does your agent think?
2. appraisal within 14 days of closing is not really rushing it.
3. maybe seller had a contract before yours that failed due to appraised value.
1 vote Thank Flag Link Mon Sep 10, 2012
Well since we are responsible for the appraisal, agreeing to 16 days puts us in a tighter bind. If we can't get the bank to get the appraisal done in time, wouldn't that be a breach of contract on our part? My agent thinks that it is suspicious that the seller is sticking so much to this point that he would rather the home stay on the market for longer rather than sell it.
Flag Mon Sep 10, 2012
When you go under contract, seller is pretty much taking the house off the market while you complete your inspection and appraisal. The sooner you finish the appraisal, the sooner they can get final loan approval and be pretty sure that your are going to proceed to closing. If there is a problem with value, the sellers would rather know sooner that later. Also, after the appraisal condition has been met, It is pretty difficult for the buyer to terminate the contract without penalty (Earnest Money). With a 30 day close, all dates are pretty tight, so the sooner that the contract dates are met the better.
1 vote Thank Flag Link Mon Sep 10, 2012
Simple: Appraisals are a issue right now. Appraisal's are a issue nationwide. We are in a changing market which, somehow, is not reflected in all appraisals. This process is a mess and the "quality" are often in question.

Similar question on Trulia: http://www.trulia.com/voices/Agent2Agent/Low_appraisal_issue…

Read this NAR article to shed some light: http://rismedia.com/2012-07-05/strong-independent-appraisal-…

You can ask for the appraisal be be done in 15 days but no one can ensure it will be done in that time frame. Who do you call?
Web Reference: http://housefitz.com
0 votes Thank Flag Link Wed Sep 12, 2012
The appraisal is a contingency in the contract. He is saying that he'll wait two weeks for you to get the appraisal. There are offers that are not contingent upon an appraisal. He want's to put the property back on the market if you happen to choose a lender that does not honor the contract dates. It is taking longer for appraisals because the appraisers don't feel motivated to get it done in a timely fashion. Very often an appraiser will accept an assignment but won't do the inspection for it for 10 days. If there is another buyer out there waiting in line ( a back up offer), this would give him the opportunity to accept it. It's very common for a property to be on the market for 5 months , then all of a sudden 3 buyers want the property. Don't assume you're the only one that wants the property. It's your job to impress upon "your" lender that you want the loan processed immediately, with no undue delays. Your lender will need 5 days after the appraisal report is in to get you a loan commitment., assuming all of your documentation is in. It actually takes only 24 hours but you're not the only loan in the pile. If your lender is busy you will have wait until they can get to you. The seller or seller's agent has experience with delays in appraisals and loan processing. You have to experience it . . . .Congratulations on your purchase.
0 votes Thank Flag Link Mon Sep 10, 2012
I don't think it's rushing it. Seems like a quick closing and it makes sense to get contingencies out of the way.
0 votes Thank Flag Link Mon Sep 10, 2012
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