Expert: liznarr - 12/14/2010

Question
we signed a contract to sell our house. The appraisal came lower than the price. The contract has a contingency saying that appraisal must meet or exceed the sale price. is that mean our contract is void now because we may change our mind and dont sale our home?

Answer
Hi David,

Sorry for the delay in responding.  I somehow must have scrolled past several emails and missed yours, because All Experts has just notified me your question is pending.

You should read your Contract for any other language regarding the appraisal to make sure there is nothing else in your Contract regarding this situation.  Generally, when a Contract states that a property must appraise for not less than the sales price/meet or exceed the sales price, etc., the buyer can elect to go forward with the sale and pay the difference that a lender will not finance so that a Seller receives the amount originally bargained for; or …

… you as a Seller can reduce your price and take less.  Either of the above events requires a change/modification to the original Contract of Sale.

My understanding of Contract law is that ANY change(s) to a legally-binding Contract of Sale must be voluntarily agreed to by ALL the parties to the Contract (and this should ALWAYS be in writing).  You cannot be “forced” to make a change to a contract and sell your house for any different terms other than you originally agreed to.  

If the buyer wants to go forward and pay the agreed price, then I think you could be held in default if you were to refuse to close in this situation.  I don’t see this happen often, however, because a lender will base their loan amount on the appraised price.  If a Buyer wanted to pay the Contract price for your house, he would have to come up with the additional money/difference out of his own pocket.  Many times, buyers – especially in this market – simply do not have the money to pay this difference.

If, however, the buyer wants you to reduce your price, you can simply refuse to do so.  In this instance, your Contract would technically be void.  

I am not an attorney and cannot give anyone legal advice.  My writing above is from my years of experience in my area and with Contracts I am familiar with.

If this buyer does not voluntarily agree IN WRITING to release you from the Contract after you refuse to make any changes to the original Contract of Sale, I strongly recommend that you consult with an attorney in your area for legal advice to verify my understanding and be guided by legal advice you receive.

Good luck to you, and feel free to write again if you have additional questions.  Again, I apologize for the delay in responding.

Regards,
Elizabeth