Buying or Selling a Home/Selling My House

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Expert: John Hendricks - 9/29/2007


Question
Hi,  Our buyer signed an agreement of sale, with the mortgage stipulation that she was going for only a $29,000 mortgage of a house with a selling price of $133,000.  She provided a mortgage committment letter as well.  Now, allegedly her mortgage company had an appraisal done which came in at slightly lower than the agreed selling price, and they are giving her a hard time about it.  She is asking for a reduction in the selling price.  Can we hold firm on the price and keep her deposit if she backs out?  I don't understand why there would be an issue because the loan to value ratio is so low.  Does she have to prove she was going for a mortgage amount stipulated on the agreement of sale?  I think she is either going for a much higher mortgage, or she now thinks she paid too much and is trying to get us to come down in price.  Thanks for any help you can give.

Answer
Dear Scott;

Thank you for your question. It is a good one especially in light of the lending industry problems you have recently read about.

If this was an 80% to 100% financed home, yes this would more than likely an issue with the lender. One of three things would happen under this situation;
1.   You can agree to reduce your price to be in line with the appraised value.
2.   You can refuse to adjust your sales price and advise the buyer that they would have to make up the difference in sales price and appraised value. Their additional deposit would make up the shortfall.
3.   You can negotiate the difference of the sales price and the appraised value between the two of you to determine how much the buyer and seller will apply towards the down payment which would make up the shortfall.

Note; I would get written statement from the lender regarding the appraisal and lowering the sales price to meet the appraised value as a stipulation to obtain a loan before entering any further negotiations. You may want a copy of the appraisal for your review as well.

In regards to your question about keeping the deposit, if the buyer has released all their contingencies including their financing and the appraisal contingency, or they did not include a financing, appraisal contingency and continued to release all remaining contingencies in the contract, yes you may have the right to their deposit if they are unwilling to complete the purchase. You would have to prove they breached their contract to collect, or all parties would have to agree to release the funds to the Sellers.

The buyer cannot change the terms and conditions for the loan once it is written in the contract without your written approval. Those would be the contract terms and conditions that all parties agreed upon initially and would have to honor through the close of escrow. It has happened frequently where the buyer would change the terms and conditions of the loan without written consent from the Seller and as long as escrow closed, no harm, no foul, but if they could not obtain what they initially agreed upon and they released all contingencies, and cannot close escrow, they may have breached their contract.

Obviously, I do not have all your paperwork in front of me, nor do I know what state you are from, as many states have different laws and regulations for this type situation. I trust you have used a Realtor who currently represents you in the sale your home, and I highly recommend you contact your agent regarding this issue for a full explanation of your rights under the terms and conditions of your contract, plus confirm my recommendations. If you get little satisfaction from your agent, call the Broker/Manager/Owner of his company, set an appointment to meet with both the agent and broker to explain your rights and resolve this issue. Good luck in resolving this issue…

Warmest Regards;
John Hendricks

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John Hendricks

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As a California Realtor for 23 years practicing in Marin and Sonoma Counties, it is now time to provide counsel through AllExperts.com to those who need advise in real estate. My knowledge and experience includes a wide range of resale residential real estate purchases, new home sales, income related investment properties involved in 1031 exchanges, and land. Let me help you in any of these areas...

Experience

John Hendricks has established himself as one of Marin & Sonoma Counties premier Realtors. A native Californian, John is a well-known and respected Realtor in both Marin & Sonoma Counties who has resided in the Northbay since 1976. John began his real estate career in 1986, and since then has distinguished himself as one or Northern California's top producing Realtors. Before joining Frank Howard Allen Realtors, John was an associate of the Prudential California Realty from 1990-1992 where his outstanding sales achievements earned him one of the company's highest honors, the prestigious "President's Circle Membership", presented to the top 2% of associates for sales and earning excellence. Since his association with the highly regarded Frank Howard Allen Realtors in 1992, John has once again established himself as one of his company's Top 10 Producing Realtors in Marin & Sonoma Counties for the years 1993 through 2007 and now in 2008. Five continuous years of outstanding performance has now allowed John to join 15 other Realtors in the prestigious "Lifetime Hall of Fame" for Frank Howard Allen Realtors. John established a group of professional individuals who specialize in a variety of areas in real estate called, 'Lundmark-Hendricks Fine Homes' This group of professionals are dedicated to the success of representing clients with the greatest amount of care and service when either buying or selling real estate.

Organizations
California Association of Realtors National Association of Realtors

Education/Credentials
Upon Request...

Awards and Honors
Frank Howard Allen Realtors "Hall of Fame Member" Chairman's Circle for 10 consecutive years

Past/Present Clients
Joe Louis & Sharon Sigurdson We want to thank you again for your excellent representation of interests during the recent purchase of our home in Petaluma as well as the sell of our home in Mill Valley. We had the unusual pleasure of working with you during the last year both as sellers and buyers. We felt that our interests were always paramount and that we received a very fair price for the sale of the Mill Valley house as well as our purchase of our new home. This speaks particularly well of you, because of the recent unstable and chaotic real estate market. Will Finke "Quite frankly, we came out of a very difficult situation, which time does not allow elaborating on. This was one of the greatest experiences of our lives as clients. John Hendricks is one of the top businessmen I have ever met." Bruce & Nancy Rosentreter "I chose John Hendricks to sell my house. I picked him because I thought he was professional, aggressive, and that he could get top dollar for my house. He fulfilled my expectations completely." Joy Schuelke "Since we were trying to sell a high end home in a very tough market, and in the middle of a very rainy winter, the prospects seemed quite bleak. I was convinced at the time, and am even more so now, that without John's tenure, patience, and tenacity, we would have not been able to move the property." Lynn McCarthy "I cannot stress strongly enough how impressed I was with the service provided to me by John and his group. Throughout the entire transaction, John was always available, always forthcoming with excellent advice based on his years of experience, and always willing to put in the extra effort to make this a positive experience for me. I feel lucky to have had the experience of working with him." Lea Lieurance-Turk "Thank you John for your outstanding real estate services for the past 5 years I have known you. You have made my dreams come true as far as selling and buying property."
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