Anna, I'm not an attorney, but as a licensed agent in AZ I have a good understanding of the contract as all agents and brokers should. In cases like this, you should immediately consult with your buyer's agent and his/her broker; they'll help you to determine the next course of action, be it speaking to an attorney, entering arbitration or filing a complaint with the AZ Dept. of Real Estate.
If you're using the standard AAR Arizona Real Estate Contract, there is no requirement in the 'boiler plate' language of the contract that forces the seller to lower the price to meet the appraised value or reimburse you for the cost of the appraisal. The contract simply allows the buyer to cancel the transaction within 5 days of receipt of a low appraisal (pg 2, section 2m).
It IS possible however that your agent OR the listing agent wrote in specific verbiage on page 7, section 8(a) that stated the seller would lower the purchase price to the appraised value if the property did not appraise at the contract price. Look on your copy of the accepted contract and see if such verbiage exists. In this current market, I don't see this type of thing added to a contract very often due to the large number of low appraisals that have occurred in the past couple of years. A seller wouldn't be wise to do this (especially a 'fix and flip' investor) because it could cost them a LOT of money if the appraisal came in significantly lower than anyone had anticipated.
In the case of a low appraisal, IF the seller does NOT agree to lower the purchase price to the appraised value, a buyer has the option to (a) pay the difference ABOVE appraised value, or (b) cancel the contract. In either case, the appraisal fee and any other fees incurred during that period (inspections, etc) are BUYER fees that are typically NOT recoverable unless both parties had agreed upon something prior to contract acceptance in writing other than the standard contract language.
Now, with that being said, since you're saying that the "...seller required you to use their preferred lender..." in order to agree to accept your offer, you might have a legitimate argument to recover some of those fees. I would strongly recommend you consult with your buyer's agent and his/her broker, and quite possibly talk to an real estate attorney. You have to weight the cost of an attorney versus the recoverable costs (appraisal fee, inspections if you did any) and see if it's worth it to pursue it further.
When a buyer and seller enter into a contract, the buyer accepts the fact that he/she must incur certain fees in order to complete their side of the agreement. The appraisal fee, which is charged up-front in some transactions, is the 'riskiest' of those fees because it's quite possible that if the appraisal comes in lower than the agreed upon purchase price, the seller will not accept the appraised value and agree to lower the purchase price. If that happens, the buyer loses that money they paid to the appraiser. (Remember, the buyer is paying for a service and the work of the appraiser; they still get paid regardless of what value the appraisal comes in at).
I know it stings, but that's part of the risk a buyer takes in this market. I know it won't make you feel much better, but you're not alone; I'll bet you could ask any real estate agent out there working in this market and most would have a story similar to yours.
Thanks for the question!
Realty ONE Group