Leanne Taylor, Other/Just Looking in Shawnee Mission, KS

Do buyers automatically have option to void contract if property doesn't appraise for purchase price in all types of loans? (i.e. VA,FHA, and

Asked by Leanne Taylor, Shawnee Mission, KS Wed Feb 17, 2010

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If you are looking in Los Altos or Palo Alto, it would be hard to find a location where a one bedroom would be better than a two bedroom somewhere else in town. Those towns are pretty good all over. Monica, what suits your needs? My daughter just moved into a really attractive one bedroom home in Portola Valley. She is single and the one bedroom home is adequate for her and her cat. For me and my wife and the home offer, that would not be adequate. But of course, there is a value difference between a one bedroom and two bedrooms home.

Your question seems simple but it is not. Whenever the answer is, “It depends…” the question is more complex than it appears.

If you are serious about buying, get together with a Realtor and have the full conversation.
0 votes Thank Flag Link Wed Feb 17, 2010
Leanne,

It depends upon what your contract says. Here in Topeka, the contract includes such language. Refer to your real estate agent, or if you don't have one, your contract/attorney.

Good luck!

Jerry
0 votes Thank Flag Link Wed Feb 17, 2010
Leanne,

Typically there is an FHA and/or VA addendum to most contracts which has a clause or space for putting in the value the property must appraise at (offer price) as a contingency. Read the wording carefully. Here in Florida it states the Buyer is not obligated to buy anything that does not appraise and has the right to walk and receive their deposit back. On a conventional loan, it is one of the financing contingencies. It even goes one step further to say: "Once Buyer provides Commitment to the Seller, the financing contingency is waived and Seller will be entitled to retain the deposit if the transaction does not close by the closing date, unless (1) the property appraises below the purchase price and either the parties cannot agree on a new purchase price, or the Buyer elects not to proceed..." These are standard in the Florida FAR and FAR BAR contracts. You need to check how contracts are written in your state.

I hope this helps.

Sincerely,

Pam Cohn
Broker Associate, GRI, CDM
Real Estate Consulting, Marketing & Sales
Prudential Tropical Realty
pcohn@prutropical.com
727-204-7155
0 votes Thank Flag Link Wed Feb 17, 2010
Leanne, the loan to value of loans is based on the sales price or appraised value whichever is less.If a home appraises for less, the amount the lender will lend is also reduced. You can elect to proceed but it will require you make a larger down payment if you choose.
Otherwise it's back to the negotiating table.
Good Luck!
Web Reference: http://firsttimehome.us
0 votes Thank Flag Link Wed Feb 17, 2010
No- there is no such thing as an 'automatic option' to void a contract, however most purchase agreements (at least the ones that I am familiar with and use) do have terminology stating that if financing is required, the property must appraise for the purchase price. This is something that should be spelled out in your contract, and you would really have to look to it for your answer.
0 votes Thank Flag Link Wed Feb 17, 2010
Contract language varies by jurisdictions. In northern Virginia, if a property does not appraise for the Sales Price the contract will become VOID, regardless of financing, IF the buyer and the seller do not negotiate to an acceptable Sales Price.
0 votes Thank Flag Link Wed Feb 17, 2010
I am not sure about voiding the contract, but if the house does not appraise you may not be able to get the loan that you were supposed to. The amount of the loan you need should be referenced in your contract, so therefore you should be able to get a denial from a lender and get your earnest money back. On an FHA loan, there is a form that needs to be signed by all parties that references the fact that the house must appraise for the selling price. This is the Amendatory clause that should be included in your contract if you are using an FHA loan.
0 votes Thank Flag Link Wed Feb 17, 2010
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