Anatomy of a Purchase Agreement
If you have been following the blog on the anatomy of a real estate contract you know that I have not written about this deal in a while. Well I am writing to bring everyone out there up to date. The house appraised for less than the purchase price, much less. This is a concern in todays market with properties still being priced at levels that are higher than the market comparisons for similar sold properties. Sellers and their agents are still in the mind set that real estate in small markets are not effected by the trends in the rest of the country. This is not the case. As real estate values come down all properties are effected. If you have a seller that thinks their property is valued at 2008 prices and their agents lists the property at that price and even if the buyer agrees to buy the house at that price the appraisal will not substantiate that price and the lender will not lend at the higher agreed on price. Do you get what I am saying. Appraisals are coming in lower than market prices and if your seller's agent is not helping the seller realize this then both of them are in for a rude awakening when the appraisal comes in. This exactly what happened this past Friday. Now the seller is upset at all of us and is stuck with false ideas about her house's worth. The real estate market is having a "rude" awakening in real time and if you are not aware of this then you will be in for a similar rude awakening when you go under contract. Take notice of recent sales when making an offer or when listing your home or land for sale. All of the conflict and discomfort can be minimized by doing some due diligence prior to listing properties.
The result of this case is yet to be determined. Right now the seller has a property that is worth about 27% less than the listing price according to an independent purchase money appraisal. There is no chance that the seller will get any where near what she has been lead to believe she can get for her house. I feel sorry for her because she has been given false hope by her agent and now that the facts are in and her house is worth a lot less than she thought she is left with pain and confusion and ultimately a lost chance to sell her house.
We have until today to negotiate a compromise on this deal so I will let you know how it turns out. A little frustrating to come this far only to have the house not appraise for the contract price. This is the market now and will be the market for the future. Make sure you understand how this works and price your house accordingly.
As always if you are reading this then you are the real estate turn around.
Be Well,
chaz