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Posted by
Melodie Lobo

does the TREC purchase contract include an appraisal contingency in the third party addendum?

My realtor is preparing an offer on a house and says that if we go conventional (not FHA or VA), I can be responsible for amount over the appraised price if Seller does not want to accept lower appraisal value. If this is true, what does the following paragraph mean from the third party addendum? It is from section B. Approval of Financing part 2. "Property Approval: Property Approval will be deemed to have been obtained when the property has satisfied lender's underwriting requirements for the loan, including but not limited to appraisal, insurability and lender required repairs. If Property Approval is not obtained, Buyer may terminate this contract by giving notice to Seller before closing and the earnest money will be refunded to Buyer."
I'm only putting down 10%. The amount That I'm offering is at the top end of the RVM estimate range but below asking. I would go a few thousand higher, but not without bank financing and I don't wish to loose the earnest money.

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does the TREC purchase contract include an appraisal contingency in the third party addendum?

By Melodie Lobo   
Posted on Jul 29, 2017 in Topic: Home Buying
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My realtor is preparing an offer on a house and says that if we go conventional (not FHA or VA), I can be responsible for amount over the appraised price if Seller does not want to accept lower appraisal value. If this is true, what does the following paragraph mean from the third party addendum? It is from section B. Approval of Financing part 2. "Property Approval: Property Approval will be deemed to have been obtained when the property has satisfied lender's underwriting requirements for the loan, including but not limited to appraisal, insurability and lender required repairs. If Property Approval is not obtained, Buyer may terminate this contract by giving notice to Seller before closing and the earnest money will be refunded to Buyer."
I'm only putting down 10%. The amount That I'm offering is at the top end of the RVM estimate range but below asking. I would go a few thousand higher, but not without bank financing and I don't wish to loose the earnest money.
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Asked by: Consumer
Posted: 4 months ago
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Keith Burrhus
about 4 months ago
#1 AWARDED - BEST ANSWER
Hi Melodie, first be careful that the contract and financing addendum reflect the correct 10% down payment and that you and your lender agree you are pursuing a 90% loan. This way if the property appraises for less than the contract purchase price, the property will definitely have not “satisfied lender’s underwriting requirements for the loan”. And if this happens, it becomes your choice to terminate the contract and get your earnest money back. There are no timeframes or deadlines associated with the “Property Approval” section of this addendum. So even if you learn of a low appraisal late in the process, you are still able to get your earnest money back.

Obviously if you exit, you still have lost option fee, inspection fees, likely loan app fee, and a lot of time. So you might consider three other options before you exit. If you have enough cash to still satisfy lender’s cash reserves requirement, you can pay the difference between the appraisal and purchase price yourself. This happened a lot in the crazy seller’s markets between 2011 and 2014. A second possibility is to negotiate with the seller a middle ground where you bring some additional cash, and the seller will settle on a lower price. Lastly, if it’s a deal killer for you, let the seller know. They might be willing to sell at the appraised price.

about 4 months ago
Gold
Ryan Kohn
about 4 months ago
Yes, if box B:1 "This contract IS subject....", the number of days to be filled in, is specifically for you to provide notice that you were unable to obtain approval during underwriting. The lender will also put the property through underwriting as well and by checking first box in B1 the property must also be approved by the lender. This includes appraisal as well as lender required repairs. If there is an issue with either and you and the seller can not reach an agreement, the contract can be cancelled with a refund of earnest money as long as no other provisions within the contract stipulate otherwise.


Source:


https://www.texasrealestate.com/for-texas-realtors/legal-faqs/category/trec-third-party-financing-addendum

about 4 months ago
Silver
Pamela Banks
about 4 months ago
Appraisals for conventional loans need to meet the lender’s guidelines.The “as-is” box must be checked in order for a conventional appraisal to be approved by a lender. This means the property has been appraised with a market value at the current state, or as-is. The other option would be "subject to," which would mean the property would be appraised at the market value "subject to" certain repairs or improvements.The appraised value must be equal to the price of the home. A lender will not approve a conventional loan if the loan amount is higher than the appraised value of the home.
Make sure your agent checks the right box on Third party financing addendum page two . If the approval is already in place and the only concern is the appraisal, Check
B. Approval of financing
#2 Property approval. Hope this helps


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about 4 months ago
Disclaimer: Answers provided are just opinions and should not be accepted as advice.
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