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Due to the market correcting itself, it is becoming common for appraisal values to fail at meeting the purchase price. What happens when you’re under contract as a buyer and the property fails to appraise? In the state of Arizona, there is an appraisal contingency that gives the buyer five days from when the appraisal is received to cancel the contract if the property fails to appraise for at least the purchase price.
This allows the buyer to notify the seller immediately that the property did not appraise for the purchase price and request a reduction to the appraised value. If the buyer and seller fail to come to an agreement, the buyer can cancel the contract and receive a refund on their earnest money.
If you are purchasing a fix-and-flip home with an FHA loan and the property was purchased within 90 days of contact acceptance, the seller may require a second appraisal. In this particular scenario, the seller would be liable for the cost of the second appraisal. When this is complete, the lender would then compare the two appraisals and take the lower value of the two.
This scenario can happen across all price brackets; it is very important to have a professional that knows the internal guidelines and policies of the major banking institutions. It also helps to have a real estate professional that can help structure an offer and help minimize your appraisal risk.
Also, we invite you to watch RE/MAX's National Housing Report for March 2014.
If you have any future real estate needs, feel free to contact Sue or myself with any of your questions. Next time, we will continue with this scenario played out from a seller’s point of view. Stay tuned!
This allows the buyer to notify the seller immediately that the property did not appraise for the purchase price and request a reduction to the appraised value. If the buyer and seller fail to come to an agreement, the buyer can cancel the contract and receive a refund on their earnest money.
If you are purchasing a fix-and-flip home with an FHA loan and the property was purchased within 90 days of contact acceptance, the seller may require a second appraisal. In this particular scenario, the seller would be liable for the cost of the second appraisal. When this is complete, the lender would then compare the two appraisals and take the lower value of the two.
This scenario can happen across all price brackets; it is very important to have a professional that knows the internal guidelines and policies of the major banking institutions. It also helps to have a real estate professional that can help structure an offer and help minimize your appraisal risk.
Also, we invite you to watch RE/MAX's National Housing Report for March 2014.
If you have any future real estate needs, feel free to contact Sue or myself with any of your questions. Next time, we will continue with this scenario played out from a seller’s point of view. Stay tuned!
