What if the house doesn't appraise?

By
Real Estate Agent with Coldwell Banker United Realtors® ~ 512.750.6899

What if the house doesn't appraise?

 

The spring market is in full swing in Texas! One thing we’re experiencing with fresh new listings coming on market and buyers out in full force are multiple offers. Pristine listings are seeing 5 - 8 offers and prices going way over list price in some communities. Remember many times it's all about a home in the perfect location.

 

In Texas we have a new tool in our arsenal: “Addendum Concerning Right to Terminate Due to Lender’s Appraisal” to include with an offer which clarifies the buyers position on what will happen if the home they make an offer doesn’t appraise. The Texas Real Estate Commission approved this Addendum in November 2018 to be used only with similarly approved or promulgated forms of contracts. These TREC forms are intended for use only by trained real estate license holders.

 

Using this Addendum is one way of easing the mind of the seller reviewing multiple offers. We have an addendum for everything so it’s not a surprise this Addendum covers appraisals that fall short of the agreed sales price. By understanding the addendum at time of offer the buyer knows their options on appraisal issues up front and are able to make a decision that suits their level of risk.

 

 

 

There are 5 options for buyers to handle an appraisal that comes in under contract price:

  • Rebut the appraisal
  • Apply more down payment to make up the appraisal shortfall
  • Change financing to lower down payment to make up the appraisal shortfall
  • Negotiate with the seller a price reduction
  • Order a new appraisal 

The Addendum makes it clear what the buyer is willing to do if the appraisal falls short and most sellers want to see this addendum with offers to insure they are not going to re-negotiate the price. Remember it's a seller's market in most areas of Texas. Resolving appraisal issues at contract time is a real plus. Everyone is on the same page and expectations are set with no surprises. All states are different so it pays to under stand the appraisal process in the state you live.

 

Selling or buying a home is a complex process and you want to work with a REALTOR that inderstands the process and can intrepret the documents you will be using. I have systems in place, references and am a good listener and communicator. Let's talk and schedule a time to see if we are a good match. Reach out to me at 512-750-6899 or dillard@reloaustin.com.

 

 

 

 

 



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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
Topic:
Real Estate Best Practices
Groups:
Texas Real Estate
All Thing's Texas
Real Estate Questions & Answers
Crap-Tacular
Tags:
appraisals
texas appraisals
home buyers need to know

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Rainmaker
3,109,872
Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400
The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803 - Plainview, NY
Long Island Home and Condo Specialists

No surpriaes with this addendum Dorie. Yes everyone is on the same page and both buyers and sellers know what the options are!

Apr 13, 2019 12:53 PM #6
Ambassador
3,726,282
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Dorie options #1 and #5 are though ones around here.  Most Appraisers around here dig in their heals so getting them to change the appraisal is unlikely.  Option #5 would be tough around here because local Lenders are unlikely to agree to a second appraisal even it the Buyer or Seller is willing to pay for it.

Apr 13, 2019 03:57 PM #7
Ambassador
3,750,107
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Dorie- you have to love addendums!  This should help the sellers as well as the buyers. 

Apr 13, 2019 05:06 PM #8
Ambassador
3,750,107
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

                                     

                                                    Thank you, Dorie 

Apr 13, 2019 06:56 PM #9
Rainmaker
3,752,579
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Hi Michael Jacobs : Sellers like this Addendum but buyers tend to like it too because they can make their own decision on what they are willing to do about an appraisal that comes in under sales price. You are right it works well for any market condition.

Hi Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400 : You are right..everyone is on the same page and has proper expectations on what will happen if an appraisal should come in lower.

Hi George Souto : You are right and that is why everyone likes this Addendum..it spells out the risk the buyer is willing to take if the appraisal comes in low.

Apr 13, 2019 07:16 PM #10
Rainmaker
3,752,579
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Hi Kathy Streib : You are back in Texas and the Texas Real Estate Commission is big on Addendums. I actually like it..we have an Addendum for everything and it works well!

Apr 13, 2019 07:18 PM #11
Rainmaker
2,804,888
James Dray
Fathom Realty AR LLC - Bentonville, AR
Exceptional Agents, Outstanding Results

Morning Dorie.

Around my area, once a lender's appraisal is in one can argue all they want, get a second one etc.  It will not effect their decision, they will always go with the one they paid for.  Pity 

Apr 14, 2019 01:01 AM #12
Rainmaker
3,489,761
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Dorie. I think this a really useful tool. It clearly favors the seller but so does the process.

Apr 14, 2019 04:16 AM #13
Rainmaker
3,752,579
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning James Dray : That is why this Amendment is so important.

Good morning Sheila Anderson : It could favor the buyer if the seller agrees to what is proposed and someday we will have a buyers market and it could help the buyer then.

Apr 14, 2019 05:22 AM #14
Rainmaker
1,949,109
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

Dorie Dillard CRS GRI ABR This is an excellent post! That Amendment is so important and wise agents will discuss it with their Sellers when they list. 

As they say, anything that sounds too good to be true may be too good, or in the case of not appraising for list price can break a deal in a heartbeat.  

Apr 14, 2019 05:47 AM #15
Ambassador
1,792,692
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Wish we had an addendum like this one in Washington. It would get it all on the table at the get-go. You are so right, sellers do wonder what will happen if the appraisal falls short - this does give peace of mind. 

Apr 14, 2019 06:23 AM #16
Rainmaker
5,223,237
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is important information to share with prospective home buyers and home sellers.

Apr 14, 2019 07:21 AM #17
Rainmaker
1,138,333
Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Dorie Dillard CRS GRI ABR - The biggest plus is knowing what course of action is going to be taken if a home does not appraise. It gives the seller the option to decline the contract if the buyer decides they will just pull out. Obviously, the seller can do an addendum to counter as well. 

Apr 14, 2019 08:37 AM #18
Rainmaker
3,165,034
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Appraisals can be tricky...and it depends on which mirror they . use ...the refinance or the purchase mirror...we believe them to be entirely different.

Apr 14, 2019 06:20 PM #19
Rainmaker
3,032,230
Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

I can see why Kathy chose to highlight your post this week!  Great job!

Apr 15, 2019 06:30 AM #20
Rainmaker
486,486
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Dorie: "Selling or buying a home is a complex process and you want to work with a REALTOR that inderstands the process and can intrepret the documents you will be using. I have systems in place, references and am a good listener and communicator. Let's talk and schedule a time to see if we are a good match. Reach out to me at 512-750-6899 or dillard@reloaustin.com...."

Well said and very important that we let the public know that they need us more than ever now,  as an intermediarie in the complex real estate deal!

Glad you were featured here in Kathy's post!

Apr 15, 2019 09:38 AM #21
Rainer
22,050
Corey Vandenberg
Platinum Home Mortgage - Lafayette, IN

I wanted to add a thought that helped recently regarding ordering a new appraisal.
It reminds me of “if at first you don’t succeed.”
The appraisal was FHA and was a bad appraisal in my limited lender view.
I talked the client into paying for another appraisal and switching the loan to conventional.
At the same time, I used a different appraisal ordering system and wallah!
A more reasonable figure...

Apr 15, 2019 06:54 PM #22
Rainmaker
1,502,840
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Complete understanding is a valuable tool - Good for Texas for creating this addendum.

Apr 15, 2019 08:02 PM #23
Ambassador
3,152,326
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

What a wonderful tool to have in your arsenal, Dorie! Knowing the market and understanding that things can and DO go wrong with the appraisals, it's always best to head it off at the pass. I wish NC & SC would put together something like this too!

Apr 15, 2019 09:26 PM #24
Rainmaker
3,152,620
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Well, how interesting that this subject is coming up again.... have not heard this type of post in about eleven years.... needless to say excellent post and this is why  Savvy Realtors are needed for a sale of a home, Endre

Apr 15, 2019 10:20 PM #25
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Rainmaker
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Dorie Dillard CRS GRI ABR

Serving Buyers & Sellers in NW Austin Real Estate
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