Seller Tip : Appraisal Waivers
The Phoenix Real Estate market is hot. You’re hearing about multiple offers and appraisal waivers. But what is an appraisal waver? Is there any way a seller can lose out by accepting an appraisal wavier?
First is to understand why, as a seller, you would care about the appraisal in the first place.
In a standard Arizona Real Estate purchase contract, there is an appraisal contingency that gives the buyer the right to cancel or renegotiate the contract if the lenders appraiser does not come up with property a value that is greater than or equal to the purchase price.
The problem in todays’ market, is that most appraisals look back in time, and values are increasing quickly.
So if the appraisal comes in below the contract price, what happens? Answer is, it depends.
Here are three common scenarios:
1) If there is no appraisal waiver in the contract, the buyer can choose to come up with any extra funds required to meet their lenders requirements (making up the gap) and the contract proceeds forward. Alternatively, the buyer can ask the seller to drop the price to close the gap. If the seller doesn’t agree, and the buyer isn’t willing or able to come up with the funds, the buyer can cancel the contract (there is a time limit).
2) If the buyer has waived the appraisal clause in its entirety, then the appraisal contingency doesn’t exist and the contract proceeds.
3) If there is a partial appraisal wavier, it depends on the specific language used. Its usually the intent that buyer has agreed to come up with some additional amount of funds to cover the gap between appraised value and purchase price, lets say $20,000. But what is $20,000 isn’t enough? That’s where the catch is. Depending on how the contract is written, the seller may be obligated to decrease the price to cover the remaining gap, in other cases they aren’t and the buyer can cancel or renegotiate (similar to the first scenario).
If you are selling your home and considering an offer with an appraisal waiver, make sure the contract language doesn’t obligate you to drop the price if the appraisal comes in low.
This is just a summary, there are caveats and additional terms that may apply. As every situation is different, you should always consult a professional for assistance in selling your home.
That’s today’s home seller tip!
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