Home Buying in Royal Oak>Question Details

John B. Ande…, Real Estate Pro in Miami, FL

I would like to know what protection is afforded by the contracts. What if the home does not appraise? What if the lender denies?

Asked by John B. Anderson, Miami, FL Mon Aug 19, 2013

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Good Morning! It really depends on the contract used and the type of financing. In our contract it states that if the lender denies credit the buyer gets his earnest money back. If financing FHA/VA the contract states that the property must appraise for purchase price. If not, the seller can lower the price, or the buyer and seller can negotiate a price, the buyer can walk or the buyer can bring the difference in cash to closing.

I hope this helps!

Good Luck,

Karen Paytas, GRI, CMS
Realtor
Real Living Kee Realty
586-709-8465
kpaytas@mirealsource.com
1 vote Thank Flag Link Mon Aug 19, 2013
This question can not be answered without seeing 'the' contract in question.
As you may have read,,,,nearly EVERYTHING in a contract is negotiable.
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Some contracts, expecially those received from a buyer with 'big bank' lending will stipulate the BUYER will pay the difference between the appriased value and negotaited price. NOTE: this is how many of the 'big banks' sell their bank owned properties.
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Some lenders or lending products will not allow the buyer to pay the difference in cash.
So, without seeing the CONTRACT, indenffing the lender, and the loan product in play....the protections afforded to the buyer can not be know.
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Buyers and sellers have demanded more options and choices in the buying and selling process. These options have created more comlexity. It's time to pick up the phone and call a Royal Oak real estate professional.
1 vote Thank Flag Link Mon Aug 19, 2013
As mentioned by others, your FHA addendum specifically spells out that the home must appraise or you can back out with no penalty to you. (minus the cost of the private home inspection and the appraisal)
The most important thing though is to have your agent pull up all the comparables in the immediate area to confirm if the appraiser may have trouble finding homes that will allow your new purchase to appraise.
Traditionally, after an offer is accepted, you will have 7 days to hire a private home inspection (est $300). Once inspection is successful, the appraisal is ordered. (est $400)
NOTE: If you and your agent think it will be difficult to get a successful appraisal - but you wish to try anyway, I suggest you write up your offer with the appraisal first, and then the home inspection following a successful appraisal. This would protect you from spending that extra $300 if home does not appraise.

Lender denies: Most Metro Detroit Realtors' contracts specify that if the lender denies the mortgage, (at no fault to the purchaser) that the contract shall be considered null and void - and all earnest deposit checks returned to the purchaser.

So hope this helps!
Lori Calzadillas
Associate Broker
Keller Williams Realty
(248) 408-3527
lorical@sbcglobal.net
0 votes Thank Flag Link Wed Aug 21, 2013
Hmmm. Normally, I think we'd all say, "ask an attorney." We're not used to having an attorney ask us . . .
0 votes Thank Flag Link Tue Aug 20, 2013
I second what Karen says. It's not out of the question for buyers to be bringing cash above the appraised price in the Royal Oak market right now.
0 votes Thank Flag Link Tue Aug 20, 2013
To directly answer your questions, 1) There is no "standard" Michigan sales contract,no the matters of earnest money deposit and mortgage contingency will be open for negotiation. 2) As previously mentioned, the FHA addendum requires the mortgage appraisal to at least meet the negotiated sales price.

As far as "nothing lost, nothing gained," as previously mentioned, unless you consider your $450 FHA appraisal and approximate $350 private home inspection "nothing," I guess that is true... However, I recommend all buyers be fairly confident that the home will appraise at local values. An estimated 15% to 20% of local appraisals are coming in low these days as sellers are over-reaching and buyers over-bid in the low-inventory feeding frenzy. 2 or 3 (or more) failed sales at $800 a pop gets expensive fast. Good luck!
0 votes Thank Flag Link Mon Aug 19, 2013
I should have mentioned that it will be an FHA purchase. I am very familiar with the contracts we use here in Florida, but I am not selling my home in Miami. I want to know if the FHA rider [addendum] in Michigan contains language regarding this. In the case of a failed appraisal, or credit denial, the lender furnishes a letter stating essentially- "no loan, for x,y,z, reason". Now with this contingency, the standard Michigan contract allows the buyer to retain their deposit, does it not? In Florida, the seller assumes the risk of going off the market with a buyer, who if they do not qualify, walks without penalty. This why the buyer is "vetted" pre-app letter, or better LP/DU results.
0 votes Thank Flag Link Mon Aug 19, 2013
It depends on the contract. Most PA would protect the buyer in the case the home does not appraise. The owner can either lower the price, or the buyer can pay the difference in cash. Often times a second appraisal will also potentialy come in ok. In the case none of these options work, the buyer walks.
0 votes Thank Flag Link Mon Aug 19, 2013
1st thing you have to do is get a preapproval from the lender...
If for any reason the home does not appraise, then we either renegotiate or walk away from the deal... Nothing lost nothing gained...
Thanks
0 votes Thank Flag Link Mon Aug 19, 2013
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