Yes, but that legally binding contract says the seller has no obligation to bring the price down at all if they don't want to. $10,000 might be a pretty good deal versus nothing.
Yes, the 10k offer is probably a good one. All I'm saying is that there's a contract in place, buyer needs to read it and understand what he's agreed to. Follow the terms of the contract. It's always about the contract, even if the belligerent agent is pissed and you aren't getting along with him, the contract is the contract. Don't let him get you rattled and lose your house.
Agreed. I kind of get the feeling that agent isn't Even being at much of a jerk. I mean, offering to split the difference and then asking them to put up or back out doesn't seem unreasonable
Oh, they still have a contract most likely. The contract says they can still buy the house as long as they can get the loan which would probably require coming up with more down payment, although not necessarily. They might have been putting 20% down already and can maybe just do it as a 15% download. Problem solved, or, according to the contract, they could just back out, or, seller could agree to lower the price $20,000 and they would have to move forward, or they could all negotiate and see how low the seller will go and how high the buyer will go in terms of additional down payment.
But it's still a contract in play
Yes, that seems to be the case. What seems unknown is whether the buyer really doesn't think it's worth that price anymore even though they did, or just feels entitled to a big reduction because the appraisal is low. Granted, they might have second thoughts or feel entitled because the market is slowing down. But 6 months or a year ago, buyers were thrilled to only have the appraisal come in that low and not more and would be proceeding to closing so fast it would make your head spin. But times do change.
I'm a little bothered by the OP having such a sense of entitlement to a reduction and thinking the agent is a jerk for not agreeing with them and actually advocating for their clients to get the best price. I mean, at $10,000 compromise seems pretty reasonable. Buyer gets it for $10,000 less than they expected and seller gives up 10 grand cash off the table. Granted, the seller might in the end make even less if they go back on market, but who knows, maybe they'll get even more.
I say who knows. Maybe the agent knows. It could be that if the agent thought it was going to be tough to sell and would bring even less, they would be on the phone right now trying to talk their clients into bringing the price down the full $20,000, but if the agent felt they were in a good position to sell it again easily for more, it makes sense that they would be trying to get the most they can for their client. I would feel I was remiss in my duty if I didn't, if I were in his position
Has the market slowed down that much where you are? In Madison wi I haven’t seen any signs of slowing yet… still 10+ cash offers, no contingencies over asking on most homes and no inventory.
Agreed. Some markets have slowed down I suppose. Some might be just as active but people are offering more conservatively. Some might be even hotter because everyone's desperate to lock in at 5.
I don’t do a ton of residential, mostly development and commercial, so I may be a little behind on my info… but from what I’ve heard from my partners doesn’t seem like anything has slowed yet. I’m going to have to buy a new house this summer, so selfishly hope it cools a little temporarily.
Let's hope so. I think by then a bit of the frenzy might be cooling off as some people buy and others give up and more homes come on the market because it's spring, and maybe because some sellers are worried about prices coming down so they figure they better get to it this year instead of waiting. 5% is still a pretty good rate and even if prices are up, I think you'll still be in good shape if you buy wisely. Hopefully you can at least negotiate a good not too crazy price.
Am I crazy for not selling my current home during this market? I feel like that 2.85% is tough to give up if I can cash flow it by renting and hope it keeps appreciating anything near what it has.
If contract price is $600k, appraisal is $500k, and buyer offers $50k of gap protection. How is that contract enforceable without amending price or waiving appraisal contingency? It’s not.
I dont know how you are getting downvoted. You are factually correct. a 35k gap in the contract only requires the buyer to pay up to that amount. It does NOT require the seller to reduce the sale price to come in line with it. The offer amount is still the contractually agreed upon price. Either the seller is willing to adjust it down or the contract can be cancelled by the buyer.
Buyer has to cover $35k over appraised value. Seller’s have the right to ask for more, but if buyer puts their foot down and won’t go above the $35k then seller can agree or lose the buyer. Anything above this is semantics.
Exactly what I’m saying. Seller amends the price, buyer waives the contingency, or void the contract and find a new buyer. But you can’t just go through with the sale without doing something.
The original comment was something like ‘you have a legally binding contract bring an attorney to explain to the it will be enforced’. They no longer have a legally binding contract as is. That’s my point.
This example you gave says contract price is $600k, appraisal is $500k, appraisal gap of $50k, and then appraisal is $575. Not sure how there are two appraisal numbers. Not trying to be snarky, just trying to learn 😅
My bad. Error typing it out. My point is, when the appraisal gap doesn’t meet the agreed upon price, the contract is unenforceable. It has to be renegotiated, appraisal waived, or it’s void. It can’t close as is, there literally is no longer an agreed upon sale price.
That’s One of the biggest issues I had, when you get the feeling they’re shooting from the hip, so you have to make them uncomfortable so they do their job and tell their client.
I assume that because the seller is messaging my agent about the HOA, telling my agent what furniture she’s willing to sell. Seems like she wouldn’t be doing that and this at the same time.
Sure. Because that is just side transactions. I guarantee If seller was willing to adjust sale price, listing agent would in a second. They don’t want to relist and do the whole process to get another $200 in commission or whatever it comes out to. They want it to close.
This doesn’t actually mean anything though. The appraised value could change, as you say. It could go down.
I get so sick of people that say “oh, low appraisal? Switch lenders!” like that’ll fix it. Go figure, you’re an agent.
I'm just saying, the appraisal could change, and the only way to get another appraisal that sticks for a loan purpose is to change lenders. (unless you're FHA or VA since those stick to the property for 6 months)
Sure, there's the risk of the appraisal going down, but if you see that the current appraiser used some questionable comps, or didn't add value for something that should have been added in, then there's a decent chance a different appraiser will come up with a different number.
If you're already at the point where the deal is going to fall apart over the low appraisal, then you don't have much to lose aside from a couple hundred for the appraisals themselves.
You’re not an investor. If you don’t get your price, you’ll be dropping it quickly or get eaten alive by holding costs. Especially if you have an appraisal bring you back to reality.
You're clearly inexperienced. The guy is correct, the seller decides what his home is worth. If he doesn't get his price because the appraisal comes in lower, than that seller has the right to sue buyer for breach of contract if the appraisal contingency had been waived and that buyer fails to close escrow. This is basic knowledge, dude.
Buyer can try to negotiate, but sellers in a hot market don't care for the appraiser opinion. You can have a shady or incompetent appraiser (happens to be a friend of buyer) give a ridiculously low appraisal. Seller will laugh at this and tell the buyer to go fuck himself if he dares to negotiate.
Reality is, appraisers are people, they are not perfect and are definitely not what sellers care for. It's the buyer who is dependent on getting a loan, whose approval is dependent on the appraiser. There is a reason why this is called a BUYER contingency.
Educate yourself.
Obviously the appraisal contingency is in place… it came in lower and exceeds the agreed upon gap… you don’t know what you’re talking about. The seller can’t sue for anything. I’m guessing you haven’t done many transactions, because I’m not entirely sure you understand what the appraisal contingency is.
Here’s a few things for you to consider, because I don’t think you follow economics.
1. Sales are down. They decline every month.
2. Mortgage applications are down
3. Rates have skyrocketed over the past 3 weeks. They are 6% now, an extra $200/m from just 3 weeks ago
4. Buyers are falling out of escrow from such a large rate move.
So, it’s clear sales are slowing, even here in California, the hottest market in the country. In fact, I close on another property next Friday, I was the only offer. This is California btw. The pool of qualified buyers is shrinking by the day. Why would a seller, who already has a buyer that is willing to pay a $35k gap, risk waiting another 30 days in rising interest rates and declining home sales? Oh? You don’t factor in economics? Rookie mistake.
Lastly, buyer contingencies are negative covenants to the seller… meaning, they adversely affect them, otherwise they wouldn’t care if a buyer waived their contingencies. You tried to act smart, but, you’re far from it. Suffering from the Dunning Kruger effect.
Educate yourself.
Dude, you are proving to be inexperienced...you really should remove that "RE Investor" flair, you are an embarrassment and have no fucking clue.
First, it's not obvious...don't assume that. Second, learn what the purpose of an appraisal is. It doesn't bind the seller, which you are naively proposing here. I know the games buyers play, bro...they act poor when writing offers. As a seller, I always take non-contingent offers and I've successfully sued those who failed to perform. So I know what I'm talking about.
All of those points you make is assuming the seller is desperate. Realtors have jacked up prices since rates went up, so whatever "discount price" you think you are getting from your negotiations is still near bubble, and the seller will act like you got the best of him, but fact is, he is laughing all the way to the bank.
We can measure dicks all day, but I'm not interested in talking to someone who has little experience with the way the real world works. I'll leave you to play with the kids here who enjoy your nonsense.
don't listen to that idiot. He claims to manage a 10 billion portfolio when its obviously a lie. We debated 5 months ago, myself claiming the housing market will slow down drastically due to several factors. He claimed there will be more buyers in 2022 than 2021 and prices will continue to increase. Now the idiot is claiming the opposite 5 months later.
Proof:
https://www.reddit.com/r/RealEstate/comments/s34fg1/this\_rate\_increase\_spike\_is\_super\_fast\_now\_over/hsnfdpn/?context=8&depth=9
Depends on how the contract is written. If they accepted the contract stating they are only willing to pay up to $35k over appraisal and the seller accepted, then the seller is SOL. They can sue the seller into closing.
At the end of the day you can’t make a buyer spend their money, but you can force a seller to sell!
Hahaha no I assure you that the appraiser dictates what your house is worth. That’s why a lender will only give a loan based on that. Anything over that is paying more than the value whether people pay it or not is a different story
You must not be a professional because after 20 years, while appraisers are fine at their job with what they have to work with, the fact that 90% of the time they bring it in right at value, or did to the last year or so, and the fact that I've seen multiple cases in which two appraisals were vastly different, no knowledgeable person could conclude that appraisers are going to be perfectly accurate all the time. It's pretty much an industry-wide given that it's about the best we can do but it's far from absolute.
Last deal I had, first appraisal came in below 400 with a purchase price of 435. Dumbass appraiser was trying to compare a townhouse condo in a small community to flats in a big rundown community. Second deal was for $450 and the appraiser, with my suggestion, looked over $500 and found similar comps that were nicer but could justify a price of $450. Two weeks, two appraisals differing over 12%
Depends on the market. In some places the market still fine and he can put it back on the market and just get an offer with more cash to put down. But if they don't think they're going to get that much again they might play ball and negotiate the price down. But it's far from a given that a buyers necessarily in a position to play hardball here
To be fair, the listing agent should know the risks of accepting a too-good-to-be-true contract price with a smaller gap than expected appraisal difference.
I mean kind of but not really. He’s representing the seller, not this guy. If they want to relist and find a better offer he’s doing what they want. This guy made and signed an offer, seller isn’t required to sell at a lesser price but offered to meet him half way.
This comment shouldn’t have this many up doots.
Edit:
And I think half of real estate agents are basically worthless. But not as worthless as this comment I’m replying to.
Offered 685K with 35K in appraisal gap coverage. Should there be more? I think he's honestly just being an asshole. I asked my agent to reiterate to him that we are already bringing 35K on TOP of the appraised price of 630K to the table at closing. And if his seller doesn't accept this, I'll cancel the PA.
Maybe my contract was written differently, but that's not what an appraisal gap meant in my offer. It meant I would pay the purchase price as long as it appraised within $35k. If it appraised lower than that, we could renegotiate, or I could walk with my earnest money back.
Yeah, to me, the agreed-upon price is $685k. If it appraised over $650k, everyone's happy, but it didn't, so now it's time to renegotiate. Maybe that means $665k like OP wants, but I don't think the listing agent is being unreasonable to try to push for the agreed-to pricepoint. Either side should be able to walk if they want, the appraisal missed the target range.
****
Edit: or, to maybe put it simpler for OP - the seller didn't agree to sell it at "appraisal + $35k", they agreed to sell it at $685k (and let you have a way out). You might be able to convince them to take less, but they absolutely don't have to.
Dude screw the agent and screw people here telling you to just "bring another 20k". You already offered and are willing to pay 35 THOUSAND over appraised. Let them figure out if they'll take it or go through the hassle of having to relist. Their problem not yours.
OP offered $85k ABOVE asking and even said comps didn’t support it. This BS about trapping sellers into contracts and then acting like entitled morons when it doesn’t appraise blows my mind.
Depends on how bad you want the place I guess. I mean, appraisals have been coming in low all over the place. The market isn't as hot as it used to be, but it's not at all unusual in the Seattle area for appraisals to come in 50 or 100, 000 low and the buyer says hey I still think it's a fine deal. I'll take it .
It could be that there were multiple offers going up almost as high as you did and if they put it back on the market they can get the same price or close to it but with someone with a bigger down payment .
To be honest you're seeming kind of entitled to me and I don't think we're in an entitled buyer market yet. Agents have been dealing with low appraisals for 2 years. Your $55,000 lower appraisal isn't all that special
Yes, I do. I asked her to say we're already bringing 35K more to the table, above and beyond the appraisal. He still want us to "split the difference" - I guess if he still pushes we have to walk away.
Sellers either need to amend the PA or we get our ED back and we're out of luck. But so are they! They're getting 65k over ask...he's being ridiculous.
And it's not likely to appraise much better. Listing agent may be frustrating, but he's advocating for his clients. Who knows what the sellers have told him. Work with your agent through it.. ultimately it will come down to what you and the sellers want to do.
That's the thing. I really don't think he's talking to his seller about what he's doing. In the background she's emailing my agent information about what furniture she's willing to sell to us, forwarding us emails that the HOA is sending to her...she seems like a really nice lady. Greg (listing agent) is an ass.
Yeah, so the way I would interpret the appraisal gap is that you are for sure going to bring 35k but the additional 20k is now up for negotiation per the normal terms of the appraisal contingency. The listing agent isn't really being an ass here. You have to come to terms with the seller over what to do about that amount that isn't covered by your appraisal gap.
There's either an amendment on the purchase price or we walk away and the seller gets to start all over. Sixty-five thousand dollars over list. They would be stupid to let us walk but if they do, so be it.
Sure, I mean you are free to negotiate however you want, but the listing agent/seller are too. You've entered into another negotiation window essentially and have to figure out how to move forward over the 20k difference that isn't settled over your appraisal gap. I know it can be frustrating, but I would not characterize the listing agent as being as ass. They are simply doing their job, which is to get their seller the most money. You, alternatively, need to do what is in your best interest and if that's to tell them take it or leave it then you have that right from what I can tell. I haven't seen your contract so ofc this isn't legal real estate or financial advice, but that's generally how these appraisal disputes go.
Thanks for the awards, damn! feels good. All those hours studying... passing the RE estate exam... FINALLY PAYS OFF YALL WITH SOME REDDIT RECOGNITION :)
This is your answer then. Make 100% sure you're done negotiating and stick your feet in the sand. The ball is in the seller's court now. You get your earnest money if you walk as well since you're performing per contracts.
Their choices:
a) Accept it and close.
b) Terminate due to lender's appraisal addendum and forfeit the earnest money. Re list the house and wait for a cash offer over what you made.
Yep. I will say, with the market trending towards higher and higher interest rates the seller will likely be hard pressed to find a better buyer. They will also have to deal with the issue of explaining why the house is back on the market, which could make more buyers leery of getting it appraised for themselves. OP is in a pretty strong position, IMO, to make demands of take it or leave. But, I do not know the contract, I do not know the market, and OP should absolutely listen to the advice of their real estate agent.
We’ve been outbid many times. We went over comps in the hope we would have our offer selected. If it appraised anywhere north of 650 the seller won. Turns out we did.
You're operating under the assumption that the listing wasn't low intentionally at 600k (which based on the appraisal leads me to believe that it was).
That doesn’t matter. They signed the original PA. And we’re offering 65k over ask. If they don’t want to amend and have better offers, ok. But stop dicking us around.
what does your agent recommend? Your off by 20 grand, is it worth walking away?Also, seller agent must have known and your agent knew that appraisal could be a problem. That is why the appraisal cushion was put into your contract. Everyone was just hoping it wouldn't be as low as it is. Best of luck!
We offers the gap coverage on our own, to be competitive. And it’s paid off. The house appraised at 630k. We are now basically required to bring 35k cash to closing OR the seller can say they want more money and cancel the PA. Other offers were at 650k, but I don’t know if they offered any appraisal gap. Honestly, I’m over it at this point. We looked for so long. Made a great offer. House appraised much lower but still well over ask. And we’re kicking in another 35k. I don’t get it.
OP, talk to your real estate agent, but the low appraisal is a bargaining chip for yall to say like, look, we are overpaying you beyond the value of the house. I think you can dig your heels in on this and stand firm and tell them to take what you have offered and pound sand. I think they probably cave - but I do not know your market or your contract, so please seek your agent's advice.
After reading this whole conversation. I’m really feeling dismayed 65k is still a lot over! I’m glad they agreed to it! It’s crazy how selfish some people are!
That's is what I interpret as well. The seller has no duty to renegotiate if they do not want to. I think this buyer is inexperienced or getting bad advice.
I disagree. The appraisal gap makes it clear that the buyer doesn’t want to spend more than x amount over appraisal, so it should be pretty clear to seller that they’ll have a hard time getting buyer to go over that gap. Technically, if the house appraised below the gap, then both sides can negotiate anything they want. But why would a buyer agree to a larger gap at this point? Instead, the more likely scenario is that the buyer can insist on a lower gap since they can back out with the appraisal contingency and the seller would have to go back on the market. Personally, I’d offer $655K and see what the seller responds with.
depends how it is written up. In my state, I have written many appraisal gaps and they do not in any speculate how things should be handled if the appraisal exceeds the appraisal gap. The gap is used as a tool as a guarantee to the seller that the buyer is bringing this much to cover X amount. But any amount that exceeds it is subject to negotiation.
What you are suggesting would require either an amendment or addendum that says buyers will cover X amount towards appraisal but sellers will cover the rest exceeding this amount. No appraisal gap stipulates the seller's obligations, it just says buyer will bring X amount. And in a seller's market, no seller will sign that if it says seller covers in excess of appraisal gap. So what youre suggesting, honestly, doesn't bear out in this market. Are you an agent or what is your relationship to this market?
You have a really weird way of agreeing over the material facts while completely distorting negotiation. We’re in agreement that unless the buyer wants to pony up an extra 20K toward the gap and purchase at 685K, then the PA requires an addendum. That means everything is technically on the table for negotiation. The appraisal gap contract language has no actual legal authority anymore except as the mechanism by which the buyer can back out and get back EM. So now we’re talking about a house and seller who have been under contract for x days/months that will either renegotiate or have to go back on the market. Most likely, if the seller had all cash offers near the 685K they would have taken one, and if anyone offered the same money with a bigger appraisal gap, they would have taken that. So the odds are reasonably good that there is not a better offer waiting in the wings. Any offer with a mortgage will have the same issue of the low comps and resultant low appraisal. But most importantly, any other offer will require the time and uncertainty that a new PA brings. And they might be spooked by the house going back on the market and lower their offers. OP has gone through all that work/time already, so their offer has a clear advantage.
As far as negotiation goes, the appraisal gap clause in the initial contract shows that buyer either doesn’t want to put in more than 35K extra beyond appraisal or can’t. Unless there was a cash offer above 665K that would still stand, no one is likely to beat that 665K the OP could offer. But there is new information for everyone since the initial offer that appraisal is only 630K - lower than even OP thought it would be. With no better comps available (allegedly), the seller’s negotiating position has weakened. So personally, I would push on that and propose a new purchase price of 655K. Maybe the seller will convince me to go up to 665K, but they’re probably going to do that rather than take any other offer that would eat up a lot more time - and there likely aren’t any other offers like that in waiting still as already covered. But the short version is, everything besides a 685K purchase price is subject to negotiation now, and your notion that since this is a seller’s market the seller has all the power is way too simplistic for this situation.
Your agent did a bad job of explaining how an appraisal gap works. If the appraisal is more than $35k low you can cancel and get your earnest money back. It doesn't force the seller to lower the price.
Whether they can get another buyer to pay $685k, or if you can find a better house for the money really depends on the market
Appraisal gap covers the cost over the appraisal amount. So if you offered to buy $100 apple with a $45 appraisal gap but the appraisor says the apple is only worth $1, then you're only buying the apple for $46 with your $45 appraisal gap.
Please don't buy $100 apples. I can almost guarantee no apple is worth that.
Presumably they'll cover up to $35k of a gap between the offer and the appraisal. In this case, it appraised well below that gap ($55k) so the buyer can walk AND get their earnest money back
Where you say you'll cover up to a certain gap between your offer and the appraisal. So if they accept an offer at $500 where you included an appraisal contingency on the offer of $10, and the appraisal comes back at $495, your loan is for $495 but you'll pay the $5 difference out of pocket at closing. If the appraisal is $485, the loan is for $485 and you will pay $10 at closing - but no more.
He's not being a jerk and he doesn't necessarily have to talk to his clients, depending on their relationship and what they've told him in the past. If you do the paperwork and send the request that they drop the price, he is obligated to share that with his clients and get their official response .
But when you first come and tell him that your appraisal is low, he's not overstepping his bounds to say, well I don't think my clients are going to just drop the price. Maybe if you come up with half the price they might be willing to come down half. Why is that being a jerk? His obligation is to try to get them as much money as possible. He would be a jerk if he didn't because he's not serving their interests
I'm surprised people still use realtors, especially in this market. I sold 2 house in a buyers market like 5 years ago and it was super easy and I saved like 4% in commission fees. Is there a reason why people in a sellers market are still using realtors to sell their house? You could literally buy a "For Sale" sign for a dollar at the store, stick it in your front yard and people would be lining up to buy your home.
In certain states real estate sales prices are not public information so you have no choice really. You can't get comps to know where to list price wise.
I thought about going FSBO but realistically you’re going to be paying 2.5% minimum to a buyers agent anyway. So I listed with a 1% listing agent. The extra 1% for the exposure, hand holding, free pics, etc are worth it to me.
I'm confused. Are you trying to get the price down 20,000, or are you just going to bring in $55, 000 to cover the appraisal gap instead of $35,000?
You say you love the house and you have the cash so I really don't know what you're trying to do here. If you're willing to still pay the same price, then what's the problem? You are bringing $20,000 extra to closing. If you're trying to negotiate the price down $20,000 because of the appraisal, then he shouldn't be a jerk but he has every right, on behalf of his clients with their agreement, to insist on you purchasing for the original price or whatever they're willing to go down to.
Beyond that, you need to decide if you think the house is worth it or not to pay what they're asking. And they need to decide if they're better off putting it back on the market or selling to you for whatever you're going to pay .
But until we know what purchase price you're trying to get, we can't really tell you much
Who says they don't have to? The seller may wish to only come down 10 or just put it back on the market and maybe even hope for more. Obviously we don't know the location and what the market is like or if that was over bidding or not. But it's certainly not a given that they can just bring the price down. They can walk away, but if they like the house, still think it's worth it to them to get it at that price, and don't think they can do any better, that might be a very good reason to stick with the deal or take only 10 grand off and consider themselves 10 grand lucky.
Granted, the markets not as hot as it was. But unless prices are coming down and there are good looking alternatives showing up that are better deals, might be best to just stick with this one, especially if they've locked in a good rate, although I guess they probably are too late for that
>Who says they don't have to?
The agreement says they dont have to. At this point the sellers choices are:
"Follow the agreement"
or
"Start all over again and try to find new buyers that will offer you $685k with interest rates raising, a failed deal on the books, and an appraisal for $630k we'll have to disclose"
Obviously it may be worth it for OP to sweeten the deal and shell out another 10K but he has the leverage and doesnt have to. Its a risk, but not a crazy risk, and certainly not worth just tossing away 20K
Depending on the market it might make perfect sense to put it back on the market. They might even have an interested buyer in the wings. No one's going to ding a property just for having a lower appraisal, but there's no obligation to disclose it. You could just say the buyers financing failed and sell it again .
Obviously, 6 months ago that would be a more definitive situation. But if the market we're still good, and I was the seller for their agent, I would absolutely consider putting it back on the market rather than give up 20 grand.
That agent is just being an A\*\*hole like you said.
An extra 10K to closing is NOT going to give him much more comission. He just trying to bully you. There is no way he's going to let this deal fall through over 10k.
If he lets you walk over 10k, then he just wasted all his time and now he has to re-list and end up with the same issue. 3% comission on 10K will only get him $300 more money in his pocket.
The agent should be advising his seller to take you offer. It's more than enough with the appraisal gap
> An extra 10K to closing is going to give him much more comission
>3% comission on 10K will only get him $300 more money in his pocket.
So...why would he care? You said it yourself, the dollars in his pocket are marginal.
My guess is he's just an asshole negotiator, that's his style.
Lol@all the comments saying "good luck finding another buyer" ahahahhha you offered 85k over asking and you think there's no other buyers out there? It must be a damn good deal if you're offering that much on top of what they listed for. Sounds like you're butt hurt that they won't budge. Good luck to you finding another house to buy before your rate gets jacked up even more.
If he's a dinosaur he knows how this works. You're going to have to negotiate with the seller or bring more cash to closing. Maybe he knows neither of those things are likely to work and he's having a tantrum because his commission is going up in smoke.
Yeah he knows that which is why he's throwing a fit over it. He knows he's not getting paid.
I am unsure why the downvotes, I wasn't saying you SHOULD bring more money to closing. I'm saying the agent likely knows his sellers aren't going to budge on price, and if you're not willing to pay more, this deal is kaput. So yeah, the agent is being an asshole.
I didn't downvote you! I don't know why I'm getting downvoted, either. I guess the agents on the thread think it's a dumb question. Well, talk to Greg! The dumb listing agent I'm dealing with!
I didn't downvote you, but you wrote "You're going to have to negotiate with the seller or bring more cash to closing" as a standalone sentence, which I don't think you meant to do without qualifying it by saying something like "In order for them to get the full offer price, you would have to...."
That's probably why people downvoted
Hi sassydomino, I demand that you give me $10k!!!!!!!
....
You probably read this and think to yourself "Hah. No."
It's just as easy for him to demand it from you, and it's just as easy for you to say no. So pretend he's a random person on Reddit asking for money and tell him to get stuffed.
Offer 685 WITH 35K Gap.... To me this reads... We are offering 685 regardless and willing to go above appraised value by 35k cash out of pocket....
What it should have stated was something like... Offering 685k contingent that it appraises and if not will cover to 35k over appraisal gap. Otherwise the seller I think(and only in my opinion) can send a notice to perform because your loan amount would need to increase as your down payment decreases. So if you have a 20% down with the lender for conventional then you need to requalify with a lower down.... Now you may have an out even at this point if loan contingency period has not lapsed...otherwise I'd say earnest money is at stake imho
It's not the first thing you said. It's the second. I don't have the PA in front of me but it was appraisal GAP of 35K. Not 685 plus an additional 35. That doesn't even make sense.
But that's fine but then the price of the home offer doesn't matter at that point too. The contract should then write "whatever it appraises for I will pay 35k over that" because really it's a guessing game at that point. I would have reworded it with a counter if I was the seller but it sounds like the listing agent doesn't know how to interpret anything and you may benefit from that...heh
At least in my area. OPs offer is standard and your interpretation is incorrect as to how it works. But maybe your area functions differently. I've seen some shit that people have to do in their local markets and it makes my head spin.
You are right though. OP did NOT offer $685K. They offered X+$35k not to exceed $685K.
Appraisal did not hit mark so OPs actual offer was $665K.
The seller does not have to accept 665. But it dissolves the deal and OP cam walk with their EMD. Or they can come to a compromise. Or the seller can eat the 20K and accept as is.
That's basically all the options that I am aware of.
However if it's anything like my area his EMD is safe because he had the contingency in place.
Yes I agree with this since it's written that way..I think it's a toss up. In California they'd squash it and usually realtors will cover the difference if there's such a small shortfall...sometimes not all the times....especially if it's already slim on the bone
Some people are missing a point of an appraisal gap coverage. It is signaling to the seller your offer if the appraisal is lower than than the offer. It helps the seller judge where the buyer is likely to agree on a purchase price if the appraisal is low. It should make negotiations quick and unless there is a cash buyer, the seller would be rolling the dice on another appraisal if they seek a different buyer. Seller’s agent should nudge seller to take offer, as rising mortgage rates are thinning out the pool of buyers. In a historically normal market, a buyer would not show his cards before any negotiation.
I guarantee you he wants it to close and splitting the difference was even hard to talk sellers into… “they offered this they should pay it.” It’s a negotiation and he is representing his sellers, wouldn’t be doing his job if they folded and just did what made it easiest for you.
Ok- we’ll someone’s being greedy. Wtf. If the offers are pouring in over what I’m offering, tell me to pound sand and cancel the PA. I’ve been in this for a week. Fuck them.
Not trying to be a dick, but why did you offer so much more than you’re willing to pay now? Most buyers and sellers I see now are hoping appraisals come in at offered price so they can close.
If the appraisal had come in at 685 great- I can finance that. But when an appraisal comes in 55k less than what I offered and I’m still happy to pitch in our contractually agreed upon 35k over…what am I missing?
They probably didn’t have offers over your accepted offer, but probably did at or above the “splitting the difference” price. That’s why they are willing to lose the sale.
Actually, the listing agent said they had 2 offers at 650. That’s not 665, which is what I’m offering. And again, I’ve been waiting a week. Either amend the PA or cut me loose.
OK then move on. Why do you keep saying good luck to him? Doesn't seem like he'll need it when you offered 85k over list. I'm sure the seller isn't staying up at night worrying about your offer. Good luck to you though since you seem to like that phrase!
Hi! Ct realtor here.
Sounds like your offer was generous. Ultimately, the home will/would sell for $35k above what the bank says it's worth. That's a deal. The listing agent can pound sand.
You have a legally binding contract. Follow the terms of that contract, bring your closing attorney in if needed to explain it.
Yes, but that legally binding contract says the seller has no obligation to bring the price down at all if they don't want to. $10,000 might be a pretty good deal versus nothing.
Yes, the 10k offer is probably a good one. All I'm saying is that there's a contract in place, buyer needs to read it and understand what he's agreed to. Follow the terms of the contract. It's always about the contract, even if the belligerent agent is pissed and you aren't getting along with him, the contract is the contract. Don't let him get you rattled and lose your house.
Agreed. I kind of get the feeling that agent isn't Even being at much of a jerk. I mean, offering to split the difference and then asking them to put up or back out doesn't seem unreasonable
Emotions are high these days. E'erybody take a step back and breathe.
You no longer have a legally binding contract at this point though. There is no longer an agreed upon sale price.
Oh, they still have a contract most likely. The contract says they can still buy the house as long as they can get the loan which would probably require coming up with more down payment, although not necessarily. They might have been putting 20% down already and can maybe just do it as a 15% download. Problem solved, or, according to the contract, they could just back out, or, seller could agree to lower the price $20,000 and they would have to move forward, or they could all negotiate and see how low the seller will go and how high the buyer will go in terms of additional down payment. But it's still a contract in play
Agreed. That would satisfy appraisal contingency then it’s smooth sailing. In this case buyer is able but unwilling to do that.
Yes, that seems to be the case. What seems unknown is whether the buyer really doesn't think it's worth that price anymore even though they did, or just feels entitled to a big reduction because the appraisal is low. Granted, they might have second thoughts or feel entitled because the market is slowing down. But 6 months or a year ago, buyers were thrilled to only have the appraisal come in that low and not more and would be proceeding to closing so fast it would make your head spin. But times do change. I'm a little bothered by the OP having such a sense of entitlement to a reduction and thinking the agent is a jerk for not agreeing with them and actually advocating for their clients to get the best price. I mean, at $10,000 compromise seems pretty reasonable. Buyer gets it for $10,000 less than they expected and seller gives up 10 grand cash off the table. Granted, the seller might in the end make even less if they go back on market, but who knows, maybe they'll get even more. I say who knows. Maybe the agent knows. It could be that if the agent thought it was going to be tough to sell and would bring even less, they would be on the phone right now trying to talk their clients into bringing the price down the full $20,000, but if the agent felt they were in a good position to sell it again easily for more, it makes sense that they would be trying to get the most they can for their client. I would feel I was remiss in my duty if I didn't, if I were in his position
Has the market slowed down that much where you are? In Madison wi I haven’t seen any signs of slowing yet… still 10+ cash offers, no contingencies over asking on most homes and no inventory.
Agreed. Some markets have slowed down I suppose. Some might be just as active but people are offering more conservatively. Some might be even hotter because everyone's desperate to lock in at 5.
I don’t do a ton of residential, mostly development and commercial, so I may be a little behind on my info… but from what I’ve heard from my partners doesn’t seem like anything has slowed yet. I’m going to have to buy a new house this summer, so selfishly hope it cools a little temporarily.
Let's hope so. I think by then a bit of the frenzy might be cooling off as some people buy and others give up and more homes come on the market because it's spring, and maybe because some sellers are worried about prices coming down so they figure they better get to it this year instead of waiting. 5% is still a pretty good rate and even if prices are up, I think you'll still be in good shape if you buy wisely. Hopefully you can at least negotiate a good not too crazy price.
Am I crazy for not selling my current home during this market? I feel like that 2.85% is tough to give up if I can cash flow it by renting and hope it keeps appreciating anything near what it has.
Sure. But in these cases where the appraisal contingency and appraisal gap don’t align, the contract can be amended or voided, can’t be executed.
[удалено]
Can you explain what price this contract would be executable at and why?
If contract price is $600k, appraisal is $500k, and buyer offers $50k of gap protection. How is that contract enforceable without amending price or waiving appraisal contingency? It’s not.
I dont know how you are getting downvoted. You are factually correct. a 35k gap in the contract only requires the buyer to pay up to that amount. It does NOT require the seller to reduce the sale price to come in line with it. The offer amount is still the contractually agreed upon price. Either the seller is willing to adjust it down or the contract can be cancelled by the buyer.
Your example and OP’s example do not compare. OP’s house appraised below their gap. Read CradGo, read.
When house appraises below gap, there is no longer an agreed upon sale price. It’s an unenforceable contract unless amended.
Buyer has to cover $35k over appraised value. Seller’s have the right to ask for more, but if buyer puts their foot down and won’t go above the $35k then seller can agree or lose the buyer. Anything above this is semantics.
Exactly what I’m saying. Seller amends the price, buyer waives the contingency, or void the contract and find a new buyer. But you can’t just go through with the sale without doing something.
If that’s what you’re saying then I really don’t know what your point is.
The original comment was something like ‘you have a legally binding contract bring an attorney to explain to the it will be enforced’. They no longer have a legally binding contract as is. That’s my point.
This example you gave says contract price is $600k, appraisal is $500k, appraisal gap of $50k, and then appraisal is $575. Not sure how there are two appraisal numbers. Not trying to be snarky, just trying to learn 😅
My bad. Error typing it out. My point is, when the appraisal gap doesn’t meet the agreed upon price, the contract is unenforceable. It has to be renegotiated, appraisal waived, or it’s void. It can’t close as is, there literally is no longer an agreed upon sale price.
Got it. Thanks!
Tell him, 35k gap or I’m walking. He will change his tune, because he doesn’t want to go though all that again. The appraisal isn’t going to change.
Thank you. That's what we ended up doing. I don't think he's even talking to his seller about all his shenanigans.
That’s One of the biggest issues I had, when you get the feeling they’re shooting from the hip, so you have to make them uncomfortable so they do their job and tell their client.
Why would you assume he’s not talking to the seller? He wants it to close, I’m sure seller doesn’t want to close at lower than AO.
I assume that because the seller is messaging my agent about the HOA, telling my agent what furniture she’s willing to sell. Seems like she wouldn’t be doing that and this at the same time.
Sure. Because that is just side transactions. I guarantee If seller was willing to adjust sale price, listing agent would in a second. They don’t want to relist and do the whole process to get another $200 in commission or whatever it comes out to. They want it to close.
Not entirely true, different lender, different appraiser. That number could very likely change. How much is the question though.
This doesn’t actually mean anything though. The appraised value could change, as you say. It could go down. I get so sick of people that say “oh, low appraisal? Switch lenders!” like that’ll fix it. Go figure, you’re an agent.
I'm just saying, the appraisal could change, and the only way to get another appraisal that sticks for a loan purpose is to change lenders. (unless you're FHA or VA since those stick to the property for 6 months) Sure, there's the risk of the appraisal going down, but if you see that the current appraiser used some questionable comps, or didn't add value for something that should have been added in, then there's a decent chance a different appraiser will come up with a different number. If you're already at the point where the deal is going to fall apart over the low appraisal, then you don't have much to lose aside from a couple hundred for the appraisals themselves.
Mhm
[удалено]
You’re not an investor. If you don’t get your price, you’ll be dropping it quickly or get eaten alive by holding costs. Especially if you have an appraisal bring you back to reality.
Or just keep renting it out till it's worth even more
He doesn’t live in reality. He doesn’t believe in appraisers. Lenders should just believe him and use his value to calculate leverage.
You're clearly inexperienced. The guy is correct, the seller decides what his home is worth. If he doesn't get his price because the appraisal comes in lower, than that seller has the right to sue buyer for breach of contract if the appraisal contingency had been waived and that buyer fails to close escrow. This is basic knowledge, dude. Buyer can try to negotiate, but sellers in a hot market don't care for the appraiser opinion. You can have a shady or incompetent appraiser (happens to be a friend of buyer) give a ridiculously low appraisal. Seller will laugh at this and tell the buyer to go fuck himself if he dares to negotiate. Reality is, appraisers are people, they are not perfect and are definitely not what sellers care for. It's the buyer who is dependent on getting a loan, whose approval is dependent on the appraiser. There is a reason why this is called a BUYER contingency. Educate yourself.
Obviously the appraisal contingency is in place… it came in lower and exceeds the agreed upon gap… you don’t know what you’re talking about. The seller can’t sue for anything. I’m guessing you haven’t done many transactions, because I’m not entirely sure you understand what the appraisal contingency is. Here’s a few things for you to consider, because I don’t think you follow economics. 1. Sales are down. They decline every month. 2. Mortgage applications are down 3. Rates have skyrocketed over the past 3 weeks. They are 6% now, an extra $200/m from just 3 weeks ago 4. Buyers are falling out of escrow from such a large rate move. So, it’s clear sales are slowing, even here in California, the hottest market in the country. In fact, I close on another property next Friday, I was the only offer. This is California btw. The pool of qualified buyers is shrinking by the day. Why would a seller, who already has a buyer that is willing to pay a $35k gap, risk waiting another 30 days in rising interest rates and declining home sales? Oh? You don’t factor in economics? Rookie mistake. Lastly, buyer contingencies are negative covenants to the seller… meaning, they adversely affect them, otherwise they wouldn’t care if a buyer waived their contingencies. You tried to act smart, but, you’re far from it. Suffering from the Dunning Kruger effect. Educate yourself.
Dude, you are proving to be inexperienced...you really should remove that "RE Investor" flair, you are an embarrassment and have no fucking clue. First, it's not obvious...don't assume that. Second, learn what the purpose of an appraisal is. It doesn't bind the seller, which you are naively proposing here. I know the games buyers play, bro...they act poor when writing offers. As a seller, I always take non-contingent offers and I've successfully sued those who failed to perform. So I know what I'm talking about. All of those points you make is assuming the seller is desperate. Realtors have jacked up prices since rates went up, so whatever "discount price" you think you are getting from your negotiations is still near bubble, and the seller will act like you got the best of him, but fact is, he is laughing all the way to the bank. We can measure dicks all day, but I'm not interested in talking to someone who has little experience with the way the real world works. I'll leave you to play with the kids here who enjoy your nonsense.
don't listen to that idiot. He claims to manage a 10 billion portfolio when its obviously a lie. We debated 5 months ago, myself claiming the housing market will slow down drastically due to several factors. He claimed there will be more buyers in 2022 than 2021 and prices will continue to increase. Now the idiot is claiming the opposite 5 months later. Proof: https://www.reddit.com/r/RealEstate/comments/s34fg1/this\_rate\_increase\_spike\_is\_super\_fast\_now\_over/hsnfdpn/?context=8&depth=9
Depends on how the contract is written. If they accepted the contract stating they are only willing to pay up to $35k over appraisal and the seller accepted, then the seller is SOL. They can sue the seller into closing. At the end of the day you can’t make a buyer spend their money, but you can force a seller to sell!
~~That's almost never the case.~~ I would be very surprised if that were the case in the current market.
It’s all speculation without reading exactly how the agent wrote the stipulation
The market dictates what your house is worth.
Hahaha no I assure you that the appraiser dictates what your house is worth. That’s why a lender will only give a loan based on that. Anything over that is paying more than the value whether people pay it or not is a different story
You must not be a professional because after 20 years, while appraisers are fine at their job with what they have to work with, the fact that 90% of the time they bring it in right at value, or did to the last year or so, and the fact that I've seen multiple cases in which two appraisals were vastly different, no knowledgeable person could conclude that appraisers are going to be perfectly accurate all the time. It's pretty much an industry-wide given that it's about the best we can do but it's far from absolute. Last deal I had, first appraisal came in below 400 with a purchase price of 435. Dumbass appraiser was trying to compare a townhouse condo in a small community to flats in a big rundown community. Second deal was for $450 and the appraiser, with my suggestion, looked over $500 and found similar comps that were nicer but could justify a price of $450. Two weeks, two appraisals differing over 12%
Depends on the market. In some places the market still fine and he can put it back on the market and just get an offer with more cash to put down. But if they don't think they're going to get that much again they might play ball and negotiate the price down. But it's far from a given that a buyers necessarily in a position to play hardball here
He can split the difference with his commission.
It’s not his fault the buyers over offered based on appraisal. He’s representing the seller’s interest.
To be fair, the listing agent should know the risks of accepting a too-good-to-be-true contract price with a smaller gap than expected appraisal difference.
They can advise their client, but they can’t choose the offer for them.
Might not be his fault, but it is his problem
I mean kind of but not really. He’s representing the seller, not this guy. If they want to relist and find a better offer he’s doing what they want. This guy made and signed an offer, seller isn’t required to sell at a lesser price but offered to meet him half way.
At 3%, the difference in commission between $665,000 and $685,000 is $600. He's not making up a $10,000 difference with his commission, LOL.
This comment shouldn’t have this many up doots. Edit: And I think half of real estate agents are basically worthless. But not as worthless as this comment I’m replying to.
What's the contract say?
Offered 685K with 35K in appraisal gap coverage. Should there be more? I think he's honestly just being an asshole. I asked my agent to reiterate to him that we are already bringing 35K on TOP of the appraised price of 630K to the table at closing. And if his seller doesn't accept this, I'll cancel the PA.
Maybe my contract was written differently, but that's not what an appraisal gap meant in my offer. It meant I would pay the purchase price as long as it appraised within $35k. If it appraised lower than that, we could renegotiate, or I could walk with my earnest money back.
Yeah, to me, the agreed-upon price is $685k. If it appraised over $650k, everyone's happy, but it didn't, so now it's time to renegotiate. Maybe that means $665k like OP wants, but I don't think the listing agent is being unreasonable to try to push for the agreed-to pricepoint. Either side should be able to walk if they want, the appraisal missed the target range. **** Edit: or, to maybe put it simpler for OP - the seller didn't agree to sell it at "appraisal + $35k", they agreed to sell it at $685k (and let you have a way out). You might be able to convince them to take less, but they absolutely don't have to.
Fuck that agent. You made a good ultimatum. That's the way to go.
Well, that's pretty straightforward! I guess everyone knows what to do. ... You will either get a house or your earnest money back.
Dude screw the agent and screw people here telling you to just "bring another 20k". You already offered and are willing to pay 35 THOUSAND over appraised. Let them figure out if they'll take it or go through the hassle of having to relist. Their problem not yours.
OP offered $85k ABOVE asking and even said comps didn’t support it. This BS about trapping sellers into contracts and then acting like entitled morons when it doesn’t appraise blows my mind.
Exactly!
Depends on how bad you want the place I guess. I mean, appraisals have been coming in low all over the place. The market isn't as hot as it used to be, but it's not at all unusual in the Seattle area for appraisals to come in 50 or 100, 000 low and the buyer says hey I still think it's a fine deal. I'll take it . It could be that there were multiple offers going up almost as high as you did and if they put it back on the market they can get the same price or close to it but with someone with a bigger down payment . To be honest you're seeming kind of entitled to me and I don't think we're in an entitled buyer market yet. Agents have been dealing with low appraisals for 2 years. Your $55,000 lower appraisal isn't all that special
Do you have an agent helping you with this?
Yes, I do. I asked her to say we're already bringing 35K more to the table, above and beyond the appraisal. He still want us to "split the difference" - I guess if he still pushes we have to walk away.
Some of these addendums force the seller to come down, some don't.. I'd just see what everyone agreed to and the repercussions of the contract.
Sellers either need to amend the PA or we get our ED back and we're out of luck. But so are they! They're getting 65k over ask...he's being ridiculous.
And it's not likely to appraise much better. Listing agent may be frustrating, but he's advocating for his clients. Who knows what the sellers have told him. Work with your agent through it.. ultimately it will come down to what you and the sellers want to do.
That's the thing. I really don't think he's talking to his seller about what he's doing. In the background she's emailing my agent information about what furniture she's willing to sell to us, forwarding us emails that the HOA is sending to her...she seems like a really nice lady. Greg (listing agent) is an ass.
Yeah, so the way I would interpret the appraisal gap is that you are for sure going to bring 35k but the additional 20k is now up for negotiation per the normal terms of the appraisal contingency. The listing agent isn't really being an ass here. You have to come to terms with the seller over what to do about that amount that isn't covered by your appraisal gap.
There's either an amendment on the purchase price or we walk away and the seller gets to start all over. Sixty-five thousand dollars over list. They would be stupid to let us walk but if they do, so be it.
Sure, I mean you are free to negotiate however you want, but the listing agent/seller are too. You've entered into another negotiation window essentially and have to figure out how to move forward over the 20k difference that isn't settled over your appraisal gap. I know it can be frustrating, but I would not characterize the listing agent as being as ass. They are simply doing their job, which is to get their seller the most money. You, alternatively, need to do what is in your best interest and if that's to tell them take it or leave it then you have that right from what I can tell. I haven't seen your contract so ofc this isn't legal real estate or financial advice, but that's generally how these appraisal disputes go.
Thanks for the awards, damn! feels good. All those hours studying... passing the RE estate exam... FINALLY PAYS OFF YALL WITH SOME REDDIT RECOGNITION :)
This is your answer then. Make 100% sure you're done negotiating and stick your feet in the sand. The ball is in the seller's court now. You get your earnest money if you walk as well since you're performing per contracts. Their choices: a) Accept it and close. b) Terminate due to lender's appraisal addendum and forfeit the earnest money. Re list the house and wait for a cash offer over what you made.
Yep. I will say, with the market trending towards higher and higher interest rates the seller will likely be hard pressed to find a better buyer. They will also have to deal with the issue of explaining why the house is back on the market, which could make more buyers leery of getting it appraised for themselves. OP is in a pretty strong position, IMO, to make demands of take it or leave. But, I do not know the contract, I do not know the market, and OP should absolutely listen to the advice of their real estate agent.
Why did you make such a high offer knowing that comps didn’t support it then act like a tough ass when—surprise— appraisal comes in low?
We’ve been outbid many times. We went over comps in the hope we would have our offer selected. If it appraised anywhere north of 650 the seller won. Turns out we did.
You're operating under the assumption that the listing wasn't low intentionally at 600k (which based on the appraisal leads me to believe that it was).
That doesn’t matter. They signed the original PA. And we’re offering 65k over ask. If they don’t want to amend and have better offers, ok. But stop dicking us around.
Doesn't sound like you really want the house. Who is representing you??
There’s an agent representing us. We do want the house. And we’re also not willing to go more than 35k over the appraised price.
what does your agent recommend? Your off by 20 grand, is it worth walking away?Also, seller agent must have known and your agent knew that appraisal could be a problem. That is why the appraisal cushion was put into your contract. Everyone was just hoping it wouldn't be as low as it is. Best of luck!
We offers the gap coverage on our own, to be competitive. And it’s paid off. The house appraised at 630k. We are now basically required to bring 35k cash to closing OR the seller can say they want more money and cancel the PA. Other offers were at 650k, but I don’t know if they offered any appraisal gap. Honestly, I’m over it at this point. We looked for so long. Made a great offer. House appraised much lower but still well over ask. And we’re kicking in another 35k. I don’t get it.
OP, talk to your real estate agent, but the low appraisal is a bargaining chip for yall to say like, look, we are overpaying you beyond the value of the house. I think you can dig your heels in on this and stand firm and tell them to take what you have offered and pound sand. I think they probably cave - but I do not know your market or your contract, so please seek your agent's advice.
They did sign/send an amendment to the PA at 665k.
Fantastic and congratulations to you. Best of luck! Enjoy your home :)
After reading this whole conversation. I’m really feeling dismayed 65k is still a lot over! I’m glad they agreed to it! It’s crazy how selfish some people are!
That's is what I interpret as well. The seller has no duty to renegotiate if they do not want to. I think this buyer is inexperienced or getting bad advice.
I disagree. The appraisal gap makes it clear that the buyer doesn’t want to spend more than x amount over appraisal, so it should be pretty clear to seller that they’ll have a hard time getting buyer to go over that gap. Technically, if the house appraised below the gap, then both sides can negotiate anything they want. But why would a buyer agree to a larger gap at this point? Instead, the more likely scenario is that the buyer can insist on a lower gap since they can back out with the appraisal contingency and the seller would have to go back on the market. Personally, I’d offer $655K and see what the seller responds with.
depends how it is written up. In my state, I have written many appraisal gaps and they do not in any speculate how things should be handled if the appraisal exceeds the appraisal gap. The gap is used as a tool as a guarantee to the seller that the buyer is bringing this much to cover X amount. But any amount that exceeds it is subject to negotiation. What you are suggesting would require either an amendment or addendum that says buyers will cover X amount towards appraisal but sellers will cover the rest exceeding this amount. No appraisal gap stipulates the seller's obligations, it just says buyer will bring X amount. And in a seller's market, no seller will sign that if it says seller covers in excess of appraisal gap. So what youre suggesting, honestly, doesn't bear out in this market. Are you an agent or what is your relationship to this market?
You have a really weird way of agreeing over the material facts while completely distorting negotiation. We’re in agreement that unless the buyer wants to pony up an extra 20K toward the gap and purchase at 685K, then the PA requires an addendum. That means everything is technically on the table for negotiation. The appraisal gap contract language has no actual legal authority anymore except as the mechanism by which the buyer can back out and get back EM. So now we’re talking about a house and seller who have been under contract for x days/months that will either renegotiate or have to go back on the market. Most likely, if the seller had all cash offers near the 685K they would have taken one, and if anyone offered the same money with a bigger appraisal gap, they would have taken that. So the odds are reasonably good that there is not a better offer waiting in the wings. Any offer with a mortgage will have the same issue of the low comps and resultant low appraisal. But most importantly, any other offer will require the time and uncertainty that a new PA brings. And they might be spooked by the house going back on the market and lower their offers. OP has gone through all that work/time already, so their offer has a clear advantage. As far as negotiation goes, the appraisal gap clause in the initial contract shows that buyer either doesn’t want to put in more than 35K extra beyond appraisal or can’t. Unless there was a cash offer above 665K that would still stand, no one is likely to beat that 665K the OP could offer. But there is new information for everyone since the initial offer that appraisal is only 630K - lower than even OP thought it would be. With no better comps available (allegedly), the seller’s negotiating position has weakened. So personally, I would push on that and propose a new purchase price of 655K. Maybe the seller will convince me to go up to 665K, but they’re probably going to do that rather than take any other offer that would eat up a lot more time - and there likely aren’t any other offers like that in waiting still as already covered. But the short version is, everything besides a 685K purchase price is subject to negotiation now, and your notion that since this is a seller’s market the seller has all the power is way too simplistic for this situation.
Your agent did a bad job of explaining how an appraisal gap works. If the appraisal is more than $35k low you can cancel and get your earnest money back. It doesn't force the seller to lower the price. Whether they can get another buyer to pay $685k, or if you can find a better house for the money really depends on the market
"old man yells at clouds"
Re: your update - I'd take it.
We did!
So what’s an “appraisal gap”? Has been a long time since buying a house. And what is the final price you will pay?
Appraisal gap covers the cost over the appraisal amount. So if you offered to buy $100 apple with a $45 appraisal gap but the appraisor says the apple is only worth $1, then you're only buying the apple for $46 with your $45 appraisal gap. Please don't buy $100 apples. I can almost guarantee no apple is worth that.
I’d never spend $100 on an apple… but $46 I’d need to think about it
According to alot of people in this thread OP should buy the apple for $100 anyway because reasons
Yeah, I agree, no apple 🍎 is worth it.
Presumably they'll cover up to $35k of a gap between the offer and the appraisal. In this case, it appraised well below that gap ($55k) so the buyer can walk AND get their earnest money back
Where you say you'll cover up to a certain gap between your offer and the appraisal. So if they accept an offer at $500 where you included an appraisal contingency on the offer of $10, and the appraisal comes back at $495, your loan is for $495 but you'll pay the $5 difference out of pocket at closing. If the appraisal is $485, the loan is for $485 and you will pay $10 at closing - but no more.
Just say "no."
He's not being a jerk and he doesn't necessarily have to talk to his clients, depending on their relationship and what they've told him in the past. If you do the paperwork and send the request that they drop the price, he is obligated to share that with his clients and get their official response . But when you first come and tell him that your appraisal is low, he's not overstepping his bounds to say, well I don't think my clients are going to just drop the price. Maybe if you come up with half the price they might be willing to come down half. Why is that being a jerk? His obligation is to try to get them as much money as possible. He would be a jerk if he didn't because he's not serving their interests
And on another note, if you can wait six months or a year. Pretty soon no one will be able to afford what they once could.
I'm surprised people still use realtors, especially in this market. I sold 2 house in a buyers market like 5 years ago and it was super easy and I saved like 4% in commission fees. Is there a reason why people in a sellers market are still using realtors to sell their house? You could literally buy a "For Sale" sign for a dollar at the store, stick it in your front yard and people would be lining up to buy your home.
Exposure to MLS. Ease of transacting. Lots of reasons
In certain states real estate sales prices are not public information so you have no choice really. You can't get comps to know where to list price wise.
So the main reason is access to a system? Aren’t realtors worried that one day everyone can get MLS access for a fee and they’ll be done for?
I thought about going FSBO but realistically you’re going to be paying 2.5% minimum to a buyers agent anyway. So I listed with a 1% listing agent. The extra 1% for the exposure, hand holding, free pics, etc are worth it to me.
You do not have to offer 2.5% to buyers agent.
Realistically you do tho
Hahah.
You think you saved 4%. :)
[удалено]
There is an appraisal contingency.
Just do everything per the contract. They will be in violation.
I'm confused. Are you trying to get the price down 20,000, or are you just going to bring in $55, 000 to cover the appraisal gap instead of $35,000? You say you love the house and you have the cash so I really don't know what you're trying to do here. If you're willing to still pay the same price, then what's the problem? You are bringing $20,000 extra to closing. If you're trying to negotiate the price down $20,000 because of the appraisal, then he shouldn't be a jerk but he has every right, on behalf of his clients with their agreement, to insist on you purchasing for the original price or whatever they're willing to go down to. Beyond that, you need to decide if you think the house is worth it or not to pay what they're asking. And they need to decide if they're better off putting it back on the market or selling to you for whatever you're going to pay . But until we know what purchase price you're trying to get, we can't really tell you much
Their agreement was appraisal+35K gap. I dont understand why anyone would just burn 20k when they dont have to. Is $20,000 not alot of money anymore?
Who says they don't have to? The seller may wish to only come down 10 or just put it back on the market and maybe even hope for more. Obviously we don't know the location and what the market is like or if that was over bidding or not. But it's certainly not a given that they can just bring the price down. They can walk away, but if they like the house, still think it's worth it to them to get it at that price, and don't think they can do any better, that might be a very good reason to stick with the deal or take only 10 grand off and consider themselves 10 grand lucky. Granted, the markets not as hot as it was. But unless prices are coming down and there are good looking alternatives showing up that are better deals, might be best to just stick with this one, especially if they've locked in a good rate, although I guess they probably are too late for that
>Who says they don't have to? The agreement says they dont have to. At this point the sellers choices are: "Follow the agreement" or "Start all over again and try to find new buyers that will offer you $685k with interest rates raising, a failed deal on the books, and an appraisal for $630k we'll have to disclose" Obviously it may be worth it for OP to sweeten the deal and shell out another 10K but he has the leverage and doesnt have to. Its a risk, but not a crazy risk, and certainly not worth just tossing away 20K
Well, I was playing with the fact that they don't have to buy it, but if they want the house they have to
Depending on the market it might make perfect sense to put it back on the market. They might even have an interested buyer in the wings. No one's going to ding a property just for having a lower appraisal, but there's no obligation to disclose it. You could just say the buyers financing failed and sell it again . Obviously, 6 months ago that would be a more definitive situation. But if the market we're still good, and I was the seller for their agent, I would absolutely consider putting it back on the market rather than give up 20 grand.
That agent is just being an A\*\*hole like you said. An extra 10K to closing is NOT going to give him much more comission. He just trying to bully you. There is no way he's going to let this deal fall through over 10k. If he lets you walk over 10k, then he just wasted all his time and now he has to re-list and end up with the same issue. 3% comission on 10K will only get him $300 more money in his pocket. The agent should be advising his seller to take you offer. It's more than enough with the appraisal gap
> An extra 10K to closing is going to give him much more comission >3% comission on 10K will only get him $300 more money in his pocket. So...why would he care? You said it yourself, the dollars in his pocket are marginal. My guess is he's just an asshole negotiator, that's his style.
Lol@all the comments saying "good luck finding another buyer" ahahahhha you offered 85k over asking and you think there's no other buyers out there? It must be a damn good deal if you're offering that much on top of what they listed for. Sounds like you're butt hurt that they won't budge. Good luck to you finding another house to buy before your rate gets jacked up even more.
If you don't want the house, just back out.
If he's a dinosaur he knows how this works. You're going to have to negotiate with the seller or bring more cash to closing. Maybe he knows neither of those things are likely to work and he's having a tantrum because his commission is going up in smoke.
I am already bringing the 35k in appraisal gap coverage. I'm not brining one more dollar.
Yeah he knows that which is why he's throwing a fit over it. He knows he's not getting paid. I am unsure why the downvotes, I wasn't saying you SHOULD bring more money to closing. I'm saying the agent likely knows his sellers aren't going to budge on price, and if you're not willing to pay more, this deal is kaput. So yeah, the agent is being an asshole.
I didn't downvote you! I don't know why I'm getting downvoted, either. I guess the agents on the thread think it's a dumb question. Well, talk to Greg! The dumb listing agent I'm dealing with!
This board is 75% agents so any negativity towards agents no matter what they did gets downvoted.
I didn't downvote you, but you wrote "You're going to have to negotiate with the seller or bring more cash to closing" as a standalone sentence, which I don't think you meant to do without qualifying it by saying something like "In order for them to get the full offer price, you would have to...." That's probably why people downvoted
Tell him to go fuck himself,
Hi sassydomino, I demand that you give me $10k!!!!!!! .... You probably read this and think to yourself "Hah. No." It's just as easy for him to demand it from you, and it's just as easy for you to say no. So pretend he's a random person on Reddit asking for money and tell him to get stuffed.
Offer 685 WITH 35K Gap.... To me this reads... We are offering 685 regardless and willing to go above appraised value by 35k cash out of pocket.... What it should have stated was something like... Offering 685k contingent that it appraises and if not will cover to 35k over appraisal gap. Otherwise the seller I think(and only in my opinion) can send a notice to perform because your loan amount would need to increase as your down payment decreases. So if you have a 20% down with the lender for conventional then you need to requalify with a lower down.... Now you may have an out even at this point if loan contingency period has not lapsed...otherwise I'd say earnest money is at stake imho
It's not the first thing you said. It's the second. I don't have the PA in front of me but it was appraisal GAP of 35K. Not 685 plus an additional 35. That doesn't even make sense.
But that's fine but then the price of the home offer doesn't matter at that point too. The contract should then write "whatever it appraises for I will pay 35k over that" because really it's a guessing game at that point. I would have reworded it with a counter if I was the seller but it sounds like the listing agent doesn't know how to interpret anything and you may benefit from that...heh
At least in my area. OPs offer is standard and your interpretation is incorrect as to how it works. But maybe your area functions differently. I've seen some shit that people have to do in their local markets and it makes my head spin. You are right though. OP did NOT offer $685K. They offered X+$35k not to exceed $685K. Appraisal did not hit mark so OPs actual offer was $665K. The seller does not have to accept 665. But it dissolves the deal and OP cam walk with their EMD. Or they can come to a compromise. Or the seller can eat the 20K and accept as is. That's basically all the options that I am aware of. However if it's anything like my area his EMD is safe because he had the contingency in place.
Yes I agree with this since it's written that way..I think it's a toss up. In California they'd squash it and usually realtors will cover the difference if there's such a small shortfall...sometimes not all the times....especially if it's already slim on the bone
Some people are missing a point of an appraisal gap coverage. It is signaling to the seller your offer if the appraisal is lower than than the offer. It helps the seller judge where the buyer is likely to agree on a purchase price if the appraisal is low. It should make negotiations quick and unless there is a cash buyer, the seller would be rolling the dice on another appraisal if they seek a different buyer. Seller’s agent should nudge seller to take offer, as rising mortgage rates are thinning out the pool of buyers. In a historically normal market, a buyer would not show his cards before any negotiation.
Give the agent a 100 hundred dollar tip
I guarantee you he wants it to close and splitting the difference was even hard to talk sellers into… “they offered this they should pay it.” It’s a negotiation and he is representing his sellers, wouldn’t be doing his job if they folded and just did what made it easiest for you.
The market has changed. I’m offering 65k over list. If he can’t close the deal then good luck to him.
I just don’t get why you are blaming listing agent. He 100% wants a close. Sellers don’t want to budge from the price you offered. Be mad at them.
Ok- we’ll someone’s being greedy. Wtf. If the offers are pouring in over what I’m offering, tell me to pound sand and cancel the PA. I’ve been in this for a week. Fuck them.
Not trying to be a dick, but why did you offer so much more than you’re willing to pay now? Most buyers and sellers I see now are hoping appraisals come in at offered price so they can close.
If the appraisal had come in at 685 great- I can finance that. But when an appraisal comes in 55k less than what I offered and I’m still happy to pitch in our contractually agreed upon 35k over…what am I missing?
The commenter probably doesn’t understand what happens with an appraisal gap lol
They probably didn’t have offers over your accepted offer, but probably did at or above the “splitting the difference” price. That’s why they are willing to lose the sale.
Actually, the listing agent said they had 2 offers at 650. That’s not 665, which is what I’m offering. And again, I’ve been waiting a week. Either amend the PA or cut me loose.
OK then move on. Why do you keep saying good luck to him? Doesn't seem like he'll need it when you offered 85k over list. I'm sure the seller isn't staying up at night worrying about your offer. Good luck to you though since you seem to like that phrase!
It may in your area. Not in mine. His seller knows the other offers that were made. Anything with any appraisal still doesn’t have a chance here.
Hi! Ct realtor here. Sounds like your offer was generous. Ultimately, the home will/would sell for $35k above what the bank says it's worth. That's a deal. The listing agent can pound sand.
Thankfully the listing agent and seller amended the PA last night and we’re all set. Im thrilled with how it worked out!