How To Protect Myself In A Purchase Agreement
I posted earlier regarding a purchase I am in the process of that came in with a much lower appraisal price than I expected. This of course messed up all my plans regarding the loan and extra money I needed to do some rehab to the house.
Thanks for everyone who answered me- you gave some great advice. I am sure it was obvious to everyone else that I should protect myself against the possibility of a low apprisal when signing the Purchase Agreement. With the value of houses in my town- I NEVER thought this would be an issue... lesson learned.
My question is for you veterans out there much more astute than I am. If you were in my shoes- what language would you include in the Purchase Agreemen to protect yourself in case the appraisal comes in too low- or any other unforseable things I am not even aware of yet!
And if you do put in this language and the appraisal was too low to obtain the financing you needed, can you still get back your earnest money? Does me signing the Purchase Agreement make all my stipulations null and void?
After hearing about the low appraisal I told the real estate agent to hold on the deal for a day so I could think. She told my banker I could not back out at this point or they could sue me! I'm not sure what or who to believe.
Please help
K
There are a variety of escape clauses that can protect you (next time, anyway), make the offer subject to inspection (which at some level could be a proxy for an appraisal), or attorney's review (a nice catch all), or seller misrepresentation, or financing (which hinges on appaisal too). The latter one should have saved you in this deal, possibly even if if wasn't in the contract. If you can't get the $$, you shouldn't be forced to perform. Some sellers and Realtors don't want to see so many escape clauses, and will try to cross them out.
Now come the words everyone dreads...better get a lawyer...and what about that Realtor? Might be some bluffing going on there; maybe your lawyer can tell the Realtor to chill.
-[ Edited by davidbarnes on Date 03/19/2004 ]
bigbear,
I don't know the laws in your area or the wording of the mortgage contingency in the purchase contract you signed--and that is the key to the puzzle here. If the mortgage provision stated that your purchase was contingent upon your obtaining financing in the amount of X$, then depending on the LTV you were seeking, maybe you have an out if your lender won't commit a loan of that LTV if the appraisal is low. I agree you should consult a real estate attorney.
The language I would use in future purchase contracts:
Buyer shall not be obligated to complete the purchase of the Property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise unless Buyer has been given a written statement from Buyer's lender setting forth the appraised value of the Property of not less than X$ {this would be the amount of the purchase price}.