Hi, I am very new to investing, but I may have a deal. I believe the comps for a specific 2be-2ba may be about $100-120K, but the seller was asking about 70K!!! (this looked like last summer’s prices).
If he signs the contract, could he back out after the appraisal is done? (We are thinking of doing conventional loan, and appraisal will be required at some point)
Advice would be appreciated ASAP,
you should read the contract process and understand it. even if people on here say this or that…you should double check it all and answer your own questions.
post it on here to get feedback.
out of curiousity, why would he back out after the appraisal?
after a contract has been signed - the appraisal, by the buyers bank, has very little to do with the seller. the appraisal is for the bank to evaluate the value and condition of the property.
It’s also very doubtful that the appraisal will actually come in anywhere but close to what you are buying it for, unless you are the one picking the appraiser.
Why? because all the bank cares about is that the property is worth what you are paying. Their appraiser, if he feels that it met that criteria, will simply put that it was worth that, probably somewhere in the $70-75K range.
Now, if you’re the one picking the appraiser, you can tell them, I want a full FMV opinion of value, not a loan appraisal. And hopefully, you’ll actually get it.
The seller should never see the appraisal and should only be told whether the appraisal was adequate to meet the contract contingencies. In practice, the seller is usually not told anything unless the property underappraises.
Can the seller back out after appraisal? By your use of the term “back out” I will assume that the contract is still binding. Yes and no. Even though he may have no legal out, a seller can just refuse to close. Then you have to take it to the courts.
Usually they an idea or have already done an appraisal before putting it in the market. In Illinois there is no recission on sales contracts. Once the seller accepts the terms of the agreement then they have finish the transaction. The only way the contract can be cancelled is if both parties agree to cancel the agreement.
Not necessarily true. Your contract will govern how and when the Seller will back out. I have seen all kinds of reasons where the Seller can back out - or at least try to do so causing the Buyer significant expenses and heartache. Hopefully you have a specific performance clause in your contract where you can force the Seller to stay in the deal.
No the seller can not get out. The seller can get out if you are not moving with your contingencies. The new California Purchase Agreements states that you will have x amount of days for due diligence, and if you don’t put in writing that you accept or reject the contingency, the contingency lives on, at which point the seller can ask you to move forward or this contract is null and void in (boiler plate language) 24 hours. Different states have different contracts with different terms. Usually when a seller signs a contract he is committed. You as a buyer, however do have contingencies and until those contingencies are all met, you have rights to get out.
The Seller can try to back out for many reasons - not just due diligence contingencies - including failure of buyer to deliver a loan commitment timely (contracts become void). Many times Sellers try and back out just because they do not choose to sell anymore and deliberately breach the contract without rhyme or reason. Then it would be up to the Buyer to seek speciic performance if it is allowed in the contract or to seek damages or their deposit back. Since the costs of litigation are so high, most buyers end up settling for their deposit returned and some additional money for their troubles. Hence…the Seller gets away with it and the Buyer moves on to find another property. Specific performance claims and very very hard to win.
And that’s the bottom line on the issue, from an attorney.
Gotta love unprovoked sarcasm…
Just trying to be informative on how the legal system works in this situation. I am an investor too and can speak from experience.