The general public including most real estate agents do not understand what an appraisal is. It's not just a value. The appraiser is doing a mortgage inspection to determine if the property meets the mortgager's lending guidelines. The appraised value may support the contract price but there may be something about the property that would cause the lender to decline the mortgage. The appraisal report is confidential and the lender is the owner of that report. The agent or vendor will never see that report unless it is released by the lender. The appraiser will never discuss the valuation with anyone but the lender unless the appraiser gets a written letter of release from the lender. Appraisers are very aware of third party liability and the lender does not want to get caught up in a law suit by releasing the report. You may be paying the lender for the appraisal but that does not make you the appraiser's client.
This is amazing! Thank you! I’m literally in contract now no appraisal contingency and appraisal was just done so I’m nervous about the financing of the buyer. Hopefully in this market it should do ok 🥴
I just went Into contact with it's stated that the appraisal comes in low we need to come up with the difference. My realtor said thr finance clause protects me if the appraisal come in low and I can't get the 80 percent financing of the purchase price not sure if he's correct and I do t want to loose my deposit if it does
If I have a seller who wants the buyer to waive a certain amount of closing costs agreed to be paid by the seller if the appraisal comes lower than the purchase price. What would be a good way of adding this language into the additional terms or do you have any recommendation for how to deal with this situation? My seller will agree to pay closing costs as long as the appraisal doesn't go below $10K of the original purchase price. Any help would be great, thanks!
Depends on how exactly you all are handling the appraisal contingency. If there is one in place and they try to negotiate a lower price then I would also just negotiate that the closing cost credit being offered is reduced. This is also why whenever someone negotiates a closing cost credit higher than $2-$3k I typically will then request that instead of a credit it be a purchase price reduction, this way you have less of a potential appraisal gap.
Are you saying on a finance deal we should be doing the appraisal contingency rider? I’ve been taught (not by an attorney) that rider is only for cash deals.
Every deal is different. This said, if your Client absolutely wants to be able to cancel and they are financed, they should be using the rider. Lastly, the rider is not only for cash deals. Lastly, here is an article from Florida Realtors also discussing this issue. www.floridarealtors.org/news-media/news-articles/2022/06/buyers-waiving-appraisals-tread-carefully
I don't believe there is a form. I have language I usually add in additional terms where I have the Buyer acknowledge there is no appraisal and that they will cover any gap that occurs as a result of a lower appraisal.
For FHA and VA, you wouldn’t use the appraisal contingency rider. You would use the FHA and VA amendatory clause rider correct? And, conventional loans are for the actual appraisal contingency rider?
FHA and VA loans already have it incorporated so yes, you wouldn’t need it. Any other contract, if you want the contract to be subject to appraisal, use the addendum.
I sold a house and we went into contract for $85,000. The appraisal came back to $83,000. I was told by my realtor that I needed to lower the contract price or the deal would cancel. So based on this I wasn't supposed to agree to this? 😅
I cannot answer this question in a vacuum without a copy of the contract, addendums and knowing the whole set of facts. I will typically defer to the professional as they were guiding your transactions.
Great explanation, thanks so much!
"A lower appraisal will not be grounds for terminating the contract!" great recommendation to add to contract
Thanks! Pleasure meeting you at Harbor a few months back.
All your content is amazing.
The general public including most real estate agents do not understand what an appraisal is. It's not just a value. The appraiser is doing a mortgage inspection to determine if the property meets the mortgager's lending guidelines. The appraised value may support the contract price but there may be something about the property that would cause the lender to decline the mortgage.
The appraisal report is confidential and the lender is the owner of that report. The agent or vendor will never see that report unless it is released by the lender. The appraiser will never discuss the valuation with anyone but the lender unless the appraiser gets a written letter of release from the lender. Appraisers are very aware of third party liability and the lender does not want to get caught up in a law suit by releasing the report.
You may be paying the lender for the appraisal but that does not make you the appraiser's client.
This is amazing! Thank you! I’m literally in contract now no appraisal contingency and appraisal was just done so I’m nervous about the financing of the buyer. Hopefully in this market it should do ok 🥴
Excellent valuable information
What is the difference between CR-6_F Appraisal Contingency and CRSP16.B.Appraisal Addendum?
Great Video. !! It was really helpful.
I just went Into contact with it's stated that the appraisal comes in low we need to come up with the difference. My realtor said thr finance clause protects me if the appraisal come in low and I can't get the 80 percent financing of the purchase price not sure if he's correct and I do t want to loose my deposit if it does
If I have a seller who wants the buyer to waive a certain amount of closing costs agreed to be paid by the seller if the appraisal comes lower than the purchase price. What would be a good way of adding this language into the additional terms or do you have any recommendation for how to deal with this situation? My seller will agree to pay closing costs as long as the appraisal doesn't go below $10K of the original purchase price. Any help would be great, thanks!
Depends on how exactly you all are handling the appraisal contingency. If there is one in place and they try to negotiate a lower price then I would also just negotiate that the closing cost credit being offered is reduced. This is also why whenever someone negotiates a closing cost credit higher than $2-$3k I typically will then request that instead of a credit it be a purchase price reduction, this way you have less of a potential appraisal gap.
Are you saying on a finance deal we should be doing the appraisal contingency rider? I’ve been taught (not by an attorney) that rider is only for cash deals.
Every deal is different. This said, if your Client absolutely wants to be able to cancel and they are financed, they should be using the rider. Lastly, the rider is not only for cash deals. Lastly, here is an article from Florida Realtors also discussing this issue.
www.floridarealtors.org/news-media/news-articles/2022/06/buyers-waiving-appraisals-tread-carefully
What If the seller agent wants in writing appraisal contingency waiver,how can a get that form
I don't believe there is a form. I have language I usually add in additional terms where I have the Buyer acknowledge there is no appraisal and that they will cover any gap that occurs as a result of a lower appraisal.
For FHA and VA, you wouldn’t use the appraisal contingency rider. You would use the FHA and VA amendatory clause rider correct? And, conventional loans are for the actual appraisal contingency rider?
FHA and VA loans already have it incorporated so yes, you wouldn’t need it. Any other contract, if you want the contract to be subject to appraisal, use the addendum.
Ok, thank you so much
I sold a house and we went into contract for $85,000. The appraisal came back to $83,000. I was told by my realtor that I needed to lower the contract price or the deal would cancel. So based on this I wasn't supposed to agree to this? 😅
I cannot answer this question in a vacuum without a copy of the contract, addendums and knowing the whole set of facts. I will typically defer to the professional as they were guiding your transactions.