Expert: Toni Yates - 3/12/2008

Question
We signed a purchase agreement with no appraisal contingency clause.  The appraisal came in over $30K lower than the offer.  So far theseller is unwilling to budge in reducing the selling price.  Can we break the purchase agreement without losing the earnest moeny?

Answer
Hi Greg-
Thanks for your question. Are you sure there is no appraisal contingency- as in if there is a financing contingency, your financing may be subject to an appraisal of at least the sales price? You would just need a letter from your bank that they are not willing to lend you the money since it didn't appraise. Obviously this doesn't work if you are paying cash. Are you working with a buyers agent? There are usually several ways to "get out" of a contract if you are determined not to proceed. It is the agents' responsibility to help you do just that if you are convinced it is not in your best interest. Have you seen a copy of the appraisal? Maybe its something curable. When you made the offer, you surely felt the property was worth it to you although I can certainly understand your concern! The short and not-so-sweet answer to your question is probably not. You will most likely lose your earnest money deposit and could possibly be sued for "specific performance" if there are really no other options and you can't get the seller to sign a release. In this market, your seller is lucky to have a qualified buyer and should work with you to meet a mutually agreeable solution (like splitting the difference or dropping the price). You will most likely recoup the money when (notice I didn't say "if") the market recovers, depending on where you're at. I hope this helps. Good luck, Toni