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Colorado Nat…, Other/Just Looking in Colorado

Do buyers have to disclose to seller that they can or cannot come up with funds above the appraised amount before closing?

Asked by Colorado Native, Colorado Thu Oct 31, 2013

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your contract must have a "subject to financing addendum"... the buyer has a specific agreed to amt of time to obtain financing and funds. if the time has passed after this period, and the buyers do not close, you have the right to keep the earnest money the buyers paid you.
0 votes Thank Flag Link Wed Dec 11, 2013
It does not appear that you have an agreement on the selling price.

You say you have come down as far as you are willing but they want more of a concession. It is not a matter of whether they have the money; you do not have an agreement.

Your agent should be able to guide you in the method of drawing a line in the sand in which the buyers release all contingencies and set a closing date based upon an agreed upon price. If they fail to come up with the cash to close, you should expect to retain their deposit.
0 votes Thank Flag Link Fri Nov 1, 2013
Thank you John. Unfortunately the buyers have up until the time of closing to release the contract. The wording in contract only states that they must terminate "before closing" so my concern is that they can string us along. We will be required to be prepared to close, meaning we will have to have vacated our property so they can take possession at time of closing, only to have them terminate at the last minute. They are angry and so are we. I am wondering why our realtor didn't add safe guards for us in the contract such as a final date to terminate that is prior to closing or they forfeit their EM.
Flag Fri Nov 1, 2013
No, because you would just need to make it clear that you will not pay over appraised value.
0 votes Thank Flag Link Thu Oct 31, 2013
Maybe its time to play a little hard ball. Before doing this make sure you have a serious talk with your agent/broker and maybe even an attorney about potential problems.

Tell the buyers that if they do not offer an acceptable amendment to the contract by a specific date that you will not sign or initial any changes no matter how small unless a Temporary Lease Addm with as many days as you need to stay in the home after closing is added to the transaction.

Best of luck .. Bruce
0 votes Thank Flag Link Thu Oct 31, 2013
Thank you for the suggestions Bruce. After repeated attempts to negotiate we have, through our realtor, taken these steps. We feel vulnerable that we are required to vacate the property by the closing date with no guarantee that the buyer will arrive at closing with full funds for the transaction. How long can they draw this out before telling us their final intentions...time of closing?
Flag Thu Oct 31, 2013

A buyer's agent would advise the buyer on what was best for them in terms of negotiations if the appraisal value comes in low or other aspects regarding financing.

Mark McNitt
m 832-567-4357
Bernstein Realty, Inc.
0 votes Thank Flag Link Thu Oct 31, 2013
No, the buyer does not need to disclose anything about their monetary position, other than a qualification letter from the lender, concerning an appraisal. A lender would be a good source for any question concerning your transaction when it comes to the appraised value and the loan. I can make some recommendations and you could get an answer today if that would be helpful.

Connie Inmon
0 votes Thank Flag Link Thu Oct 31, 2013
The buyer does not have to give you a copy of the appraisal, but your agent should be able to find out if it appraised for sales price once the appraisal is complete. If the house has been appraised and you know that it came in below sales price a discussion with the buyers agent is in order to find out what the buyer's intentions are. Your agent should be proactive at this stage and not cooling their heels hoping the deal closes. If they cannot or will not come up with the difference, a termination of contract should be executed by the buyer's agent. The buyer will have the right to their earnest money back under the lender provisions of the contract but it will enable you to move forward accordingly. If they intend to stay in the contract and come up with the difference, you may want to employ a real estate attorney to see if an amendment to contract can be drafted to bind them to that intent.
0 votes Thank Flag Link Thu Oct 31, 2013
Thank you for your input Margaret!
Flag Thu Oct 31, 2013
I understand, you are in a very difficult situation. Real estate transactions are not for the faint of heart. One negotiating tactic is to make a final overture & then sit back & wait if time is on your side. Your situation includes a high amount of urgency; if the buyer's situation is not equally as urgent (such as an investor that is not bound to any time frame to purchase a property) than they have the upper hand at this point. What may be to your advantage is that the buyer has invested time & money in pursuit of purchasing your home. Also, inventory is in short supply right now, & in most cases the prospect of withdrawing from a contract & starting all over from scratch is not a desirable one for a buyer. I am not advising you, simply speculating as to the dynamics of the transaction. I would advise that you contact a real estate attorney to look over all aspects of the contract if you would like to see if you have any recourse. As realtors we cannot give legal advice.
Flag Thu Oct 31, 2013
Thank you for your answer. We feel we are in limbo as negotiations have stopped with no agreement reached with the buyers They are insisting that we contribute more than we have already agreed to after they offered us a full-price offer on our home. We have come down on price as far as we are willing. As sellers we are locked into the contract not knowing up until closing day if they will follow through or not. Does this seem right? We have to vacate the property day of closing.....only to risk finding out they will not meet the requirements of the contract? Surely there is some protection for the seller in this circumstance?
Flag Thu Oct 31, 2013
Thank you all for taking the time to answer my questions!
0 votes Thank Flag Link Thu Oct 31, 2013
If this is a Texas contract....you posted in Houston forum.

I would say the buyer has no duty to disclose anything like that. However, the seller has no duty to accept the offer.

If you are in the contract already. Your answer is in Paragraph 4A1. If it does not appraise and the lender will not loan the amount specified, the buyer has the right to terminate and have the EM returned up to closing day.
Web Reference: http://www.DaveRealty.com
0 votes Thank Flag Link Thu Oct 31, 2013
This is in TX...so would we have to assume that they are proceeding and prepare to vacate on the closing date not knowing if they will have all funds? Is there no protection for the seller in this circumstance? When would they have to inform their lender of their intentions?
Flag Thu Oct 31, 2013
Are you the buyer in the scenario? Are you planning on releasing your loan contingency if you are pressed by the seller to do so? Would you do that knowing that you cannot perform and you will be putting your deposit in jeopardy? Are you simply trying to negotiate the price down based on the appraisal?

Are you the seller who has seen the appraisal fall short? Has the buyer’s loan contingency period expired?

“Do buyers have to disclose…” No, but it is not that simple, is it?
0 votes Thank Flag Link Thu Oct 31, 2013
Technically, no ... unless such a matter is specifically addressed in the contract. However, a good buyer's agent would likely have had you agree to a price that is within the parameters for the area. None of us like surprises. Worst case scenario: the lender declines to finance the transaction, your earnest money deposit is refunded, and you're on your way down the road.
0 votes Thank Flag Link Thu Oct 31, 2013
I am the seller in this transaction. Our negotiations have come to a halt after many back and forth proposals. My concern is that they can go up to closing date without letting us know if they have the extra funds to meet our agreed upon contract. I am in the process of packing, will be renting a truck for a cross country move and have many other considerations including a contract to buy a home...with a contingency of course. Can our buyers drag this out holding us hostage or do they have an obligation to inform us. How about the lender,..at what point will the lender have to know if the transaction is a go?
Flag Thu Oct 31, 2013
If I am representing the home owner, and the home is located in a highly desired community of custom built homes with only 2 sales in 2013 and you are presenting funding from Bank of America, Wells Fargo or Chase....youe offer whould not be accepted without the agreement to come up with the funds needed to negate a FIAT appraisal.
The appriaisal is solely to assure these banks can sell the mortgage to Fannie and Freddie and has litte reltaionship to the defination of MARKET VALUE. They become a third party to the negotations who have completely seperate goals.
You have already reached an agreement regarding the purchase price with the seller. You may want to consider increasing the downpayment if this is the house for you.
Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
Move to the FRONT OF THE LINE (http://FirstLookHomes.us)
0 votes Thank Flag Link Thu Oct 31, 2013
usually if the appraisal comes in lower, the buyer can either request that the seller lowers the sales price to meet the appraised value or he can terminate the contract on the basis that he does not have the additional cash to close on the transaction as agreed to. Do not wait until closing because the earnest money would be on the line if the buyer does not notify seller that he was not able to get the loan he needs to purchase the property because of appraisal.
0 votes Thank Flag Link Thu Oct 31, 2013
Colorado Native .. I do not know of any legal requirement in Texas but I am not an attorney. But I can say that leaving the disclosure to just before or the day of a closing could seriously hurt any possible negotiations to find a solution. Maybe the seller could help by lowering the sales price but if you make them mad they may not even consider helping.

I would sit down with your agent and try to find a way to make it work for all parties. Communication is what makes solutions possible.

Best of luck .. Bruce
0 votes Thank Flag Link Thu Oct 31, 2013
No, unless specifically mentioned in the contract for such a scenario. Typically, if a property is appraised below (not slightly below) contract price, the lender would ask the buyer to come up with the additional funds only if the lending ratio exceeds the guidelines under which the buyer was approved. Buyer can 1) Review the appraisal report for errors, omissions and provide comps to revise the appraisal, 2) Request a re-appraisal at his own cost, 3) Negotiate the price or incentive with the seller to cover the shortage or 4) Do nothing in which case the lender will back out and the deal will fall through.
0 votes Thank Flag Link Thu Oct 31, 2013
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