Hi guys, we’re about to go into contract in the next day or two, but the sellers are pushing back on a clause that our lawyer added. This clause states that if the bank appraisal comes in lower than our accepted offer, we have the right to back out and get our money back. The sellers are saying that the initial offer is what we agreed to, and the appraisal is just for the bank’s purposes. We’re really nervous about putting down our 10% earnest money, especially if the appraisal doesn’t match what we offered. There’s also a clause that says if the bank won’t lend based on the appraisal, we can get our money back. I’m just wondering, is it usual to negotiate the price again if the appraisal comes in lower than the accepted offer? And is it normal for the seller to say that the appraisal is only for the lender and not a point for negotiation? I’ve seen some confusing info online about waiving appraisal contingency and what that means. Thanks for your help!
Did you already sign a contract, or are you still in negotiations? If it’s just a verbal agreement, that doesn’t mean much. You can ask for whatever you want in writing, and the seller can either accept or decline. Sometimes people renegotiate when appraisals come in low, but it really depends on the situation and how stubborn the seller is. Just keep in mind that if you haven’t signed anything yet, it might be a sign that the seller isn’t going to cooperate.
We did send a signed offer letter when we put down our initial offer and went through the inspection process to negotiate the final price. Now we’re negotiating the contract with lawyers, and the bank appraisal comes next after we sign. There’s a clause saying we can back out if the bank won’t lend us money based on the appraisal. But if the bank does lend, and the appraisal is below our offer, we might feel stuck. Does that make sense?
When I bought my place, my lender said they wouldn’t finance if the appraisal came in low. That’s why I had a financing contingency in my contract. It protects you from getting stuck.
Definitely do not waive the appraisal contingency. It protects you in case the appraisal comes back lower than your offer, allowing you to back out. If it does come in low, you can request a price reduction. Sometimes sellers are willing to meet halfway to cover the difference, but it’s not guaranteed.
Thanks for the advice! Just to clarify, there’s a clause that says if the appraisal affects the bank financing, we can back out. The only issue is that if the appraisal is lower than our offer but the bank still lends us the money, we’re stuck proceeding at the initial offer price. I just don’t want to feel like I’m overpaying.
When we bought, our standard contract had a clause about the appraisal invalidating the contract if it came in low. It might vary depending on the loan type. My lender advised against waiving the appraisal contingency, which helps protect you. If you love the house, just make sure you’re okay with the potential extra costs before moving forward.