Real Estate Law
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I assume that you're the buyer in this situation? Was there a "mortgage approval" contingency in the contract?
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Sorry, Yes, we have mortgaghe contingency.
And you're the buyer, correct?
The appraisal in and of itself would not be a basis to back out of the agreement, unless you had a separate contingency that said that it would appraise at that value. However, in PA, the standard mortgage contingency clause stipulates a specific loan to value ratio as part of the mortgage terms. If the sale price falls below the offering price during the appraisal process, then the loan to value is now incorrect. Buyers also have the option of including an appraisal addendum with their offer to protect themselves in the event it doesn't appraise. If it's an FHA loan, there's also a section of the contract that states that the home has to appraise for a specific price.
So in short, if you can't get a mortgage because of the appraisal, you can back out.
That is, the mortgage contingency was not met, because of the appraisal.
If you have an appraisal addendum in your contract, that would give you another basis to back out.
But our lender would still approve our loan.
Can we ask to renegotiate the price and what would happen if we walked away?
You could certainly ask to renegotiate the price, and assuming the loan to value ratio is not met, or there's an appraisal addendum, that would certainly strengthen your case. But the problem is that a mortgage contingency in and of itself would not allow for backing out if a house does not appraise, unless the appraisal made the loan fall through.
If you were to breach the contract, the seller could sue for actual damages, or could just sue for the liquidated damages in the contract.
That depends on what you section (probably in 22(g) of the contract) says in regards XXXXX XXXXX being able to retain sums paid by buyer as liquidated damages.
It is not a standard Pa. Sales agreement.
If that section is not checked or present, then the seller could sue for the "damages" as a result of the breach. This usually is the difference between what you agreed to buy it for and what he ultimately sells it for. If that's the same or more, then there would not really be any damages.
But if it's less, then that would be "lost profit" in a breach.
I am waiting to hear from the inspection company today. In the mean time there is another comparable property going on auction on Saturday. Do I dare bid on that property?
You can, but understand what options are available to the seller. The seller can't force you to take the property and buy it outright. Rather, the seller could only sue you for that difference between what you agreed to buy it for and how much it's ultimately sold for. You're not going to have two properties, even if there is a breach.
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