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Real Estate ?, Does Anyone Know?
OK- I have already told her to contact her lawyer, but:
My mother had her house for sale. It is an older home built in the 1960's and in a bad neighborhood. She got an offer and signed a contract back in May for $90,000 and she pays closing costs. Well, after a few home inspections and a few thousand in repairs she was required to make, the FHA appraiser finally did the appraisal for the buyers: $50,000 they valued the house at. What a disaster. We know her home is in a bad area but the $90,000 was the fair market value according to many sources, including her realtor.
Her realtor is a dual agent for the buyer and for her. Would she be able to re-negotiate the contract due to the appraisal? Doesn't seem fair or equitable for her to get $40,000 less than agreed upon contract price and still have to pay the buyers closing costs. Especially after the work and money she already had to invest to make repairs.
Anyone know? Ugh this is sad to me. It's all she has left and this money needed to last her for a while. She is a senior and on fixed income. This market is bad, but she needs to unload the house. She owns it free and clear and lives in a senior apartment in better area...she won't be moving back to the home...
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Ughhhh...the heartache known as real estate. FHA has a lot of rules and if the buyer is staying with them as a lender, then you might need to walk away.
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Julie
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I ran into a similar situation a little less than a year ago. Had a contract on a house for 160k, and the appraisal came back at 120k. Yikes!
Unfortunately your mom is probably out of luck. The bank lending money to the buyers is not going to lend 90k to someone to buy a house that's appraised at 50k. She can try negotiating with the buyers, but that basically will require the buyers to make up the difference between 50k and the final price in cash that will give them no equity. No buyer in their right mind would ever do that. Every typical financed real estate purchase contract I've seen is contingent on the buyer getting satisfactory lending. Because of the appraisal coming in so low, that part of the contract gives them an out (again in most situations without knowing the specific contract terms here).
The appraisal is what it is, the agent handling it can see if there are better comparables for the appraiser to reconsider, but I doubt there's any way it's going to make a 40k difference.
In my case I asked the sellers if they'd be willing to come down to the 120k price and they said no, they would wait and hope for an all-cash buyer who didn't mind paying 160k for a house with a 120k appraisal on the books. The home sat for another 9 months before they finally took it off the market and they still live there now.
She can certainly contact an attorney to see what her options are, but I wouldn't get my hopes up.
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I just bought a house. From what little I know, I think your mother will have a hard time selling for more than that appraised value. I'm really sorry for the bad news. I hope things go better for your mom.
Sherri
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Thanks everyone- I agree she won't get more than appraised value- but do you think she could get out of paying the closing costs of the buyer???
She agreed to pay buyers closing costs based upon the sale price being $90 thousand - I just don't think she should have to take that huge hit AND pay their closing costs. She's already had to put a few thousand into it for required repairs.
Ugh I know she's not alone...we still think she should sell. I doubt she'll ever see it appreciate that much in the coming years given the area it's in.
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For what it is worth. Sometimes lenders use appraisers that do not know an area. As crazy as that sounds it does happen. If you can support that fair market value is roughly $90,000 I would check into it. There may have been a mistake. Your realtor will be able to help you with that. I wish you the best of luck.
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I'm not certain the laws in your area, but in general it seems as though the contract you signed was $90,000 and buyer pay closing costs.
If the contract was contingent on them obtaining financing for $90,000 and they cannot, then the original contract is null. If they want to try to renogiate a new (lower) purchase price with you, then you are negotiating a new contract. As part of the negotiation of the new contract, you do not have to agree to pay closing costs (although that may be a deal breaker for them, you never know). And, maybe you can also try to negotiate them paying the repair costs also.
Karen
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I worked in the mortgage industry for six years, so I'm a bit more educated on this stuff than the average man on the street but not much ... here's my take ...
It's all really dependent on what the contingencies were in the original contract. If it was contingent upon the appraisal coming back at $90k or more then I believe the contract is voidable, but it may only be voidable by the buyers. Not sure if your Mom can back out or not.
That's what it's going to come down to ... how the actual contract language is worded.
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As a realtor in the past this quote from your original post has me the most concerned:
"Her realtor is a dual agent for the buyer and for her."
Although I'm not familiar with Illinios state laws, in a lot of states the primary fiduciary responsibility of the realtor is first and always to the home seller. The buyer should have received a statement acknowledging that.
You need to contact the local Board of Realtors and ask them for help and file a complaint if necessary. Believe me no realtor wants a complaint filed to their record.
KAY
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Is it possible for her to rent it out until the price comes up a little?
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Laws can vary by state, therefore her attorney is the best source for contractual questions.
Was there a financing contingency in the contract? If yes, the loan would be denied based on an insufficient appraised value. Thus, a renegotiated purchase price should be at the seller's discretion.
The market in that area could be bad, which resulted in the low appraised value. Did the comparable(comps) sales used by the appraiser make sense? As mentioned previously, was the appraiser familiar with this area? Sometimes lenders use appraisers from a great distance away. This will often produce a poor appraisal.
Does the realtor know about better comps?
The realtor should have had an idea of the current market value when the property was listed for sale. A $40,000 discrepancy suggests that there is a problem with the realtor, or the appraisal.
FHA appraisal standards are often tighter than conventional loan requirements. Also, a cash buyer could be a better option.
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Good points brought up, we're still waiting to hear more info and I know her lawyer seemed to think it was worth exploring a field review. I would love to see the appraisal and comps (I used to be a lender many years ago, just never came accross this situation). Unfortunately we had a pretty bad storm here Monday with damaging 80-85 mph winds and almost no one has had power so everything has been slow going. Her lawyer told her a neighbor two houses down just sold her house for a similar price so it sounds like the appraisal may be correct... now her tree blew over into her house from this storm to add to the mess. Waiting now on the insurance adjuster. Will be glad when this is over and she no longer has to deal with all these issues!
Thanks all for the help. Will let you all know once we know more.
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