Oh Oh Real Estate Moments: Dealing with Bumps in the Road

You found your home, made the offer and then - oops - the appraisal comes in lower than the agreed purchase price. 

What is a buyer to do???

Don't panic.   Usually this issue is addressed in the purchase agreement.  In the purchase agreement used by most Las Vegas real estate agents there are four things that can happen.

• The seller reduces the price to meet the appraised value.

• The buyer comes out of pocket with the difference between the appraised value and agreed price.

• The buyer and seller meet somewhere in the middle of the appraised value and agreed price.

• The buyer and seller can't agree and the contract is cancelled.  Buyer gets their earnest money deposit refunded.

What I do is send the seller's agent a copy of the appraisal along with an addendum requesting the purchase price be reduced to the appraised value.  Then the negotiations begin. 

The thing to remember is that the seller doesn't have to agree to reduce the purchase price.  In addition, if the seller does agree they could offset the reduced price by reducing closing cost contributions.  Sometimes you will find a seller that doesn't budge.  Then it is up to the buyer to decide: come up with the difference or walk away. 

Also, we can always go to the underwriter if there is a concern about the appraisal and have them dispute it (which generally doesn't go very far, but worth a try anyway). 

Be careful when you sign a purchase agreement to make sure you have not waived your appraisal contingency.  Waiving the appraisal contingency means you agree ahead of time to make up the difference between the appraised price and the purchase agreement.  Your lender will not loan you more than the appraised value of the home.  This type of waiver was common when our market was hot.  I have also seen it a few times lately as well. 

Las Vegas Buyer Resource: You Cannot Know Everything

It is impossible to know everything that will happen when you are buying a home.  Closing costs, interest rates, HOA rules and regulations, the condition of the home ... it goes on and on .... are all items that are generally not known when you first start looking at homes (or even when you are under contract at times).

Image: ddpavumba / FreeDigitalPhotos.net

It is important to go with the flow of the deal and know that eventually you will pin down all of the details.  One day can look like a total disaster then the next everything magically works itself out.

The key is to keep in communication with the people helping you in your home purchase.  Your real estate agent, escrow officer, home inspector, loan officer, insurance agent are all here to help you get through these stressful times.  Let them know what issues are important to you so they can try to get the answers as soon as possible.

Keeping quiet doesn't solve anything.  Speak up - after all in the end it is your money and you make the decisions.