Need some input from other sellers

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Need some input from other sellers

Abdul Azeez
Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes

I am an investor who listed a house on sale with a realtor. We received several offers and I selected a loan offer. The contract had a special stipulation indicating that buyer is willing to pay $5k over appraisal if appraisal is less than offer price. After appraisal, although appraisal came higher than list price, it came less than offer price. With the $5k added, it still did not meet my lowest limit I was hoping to get. The buyer was unwilling to go up any higher. So, I asked my realtor to terminate the contract and move forward with a backup offer. However, buyer threatened to sue due to non-performance. After talking to attorney on my side, the listing realtor and broker have clearly said that seller does not have to accept the lesser offer. So, a notification was sent to the buyer than unless they immediately terminate the contract we expect them to close as scheduled. Closing is less than a week away. However, since the seller was unwilling to even come up to a mid-point previously, I highly suspect they will do the offer price. I have tried to follow up multiple times with my realtor and broker and they said they are still waiting for the other side to respond. It's been 4 days. Given that a) closing is coming up next week and b) I am unable to move forward with the back up offer, what do I need to do now other than indefinitely wait. When I follow up, I keep getting the message that they are still waiting for buyer side to respond.

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Charlie MacPherson
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
4y
I'm confused.  You say that the offer came in higher than your list (asking) price, but was less than you were hoping for.

The buyer met your listing price and offered up to an additional $5,000 to cover any appraisal gap, bringing the offer even further over the asking price.

If I'm reading you right, you accepted the buyer's offer, but hoped to squeeze even more money out of them based on the appraisal.  That's pretty crappy business on your part.

IANAL, but if you did accept the offer and EMD changed hands, the three basic elements of the contract have been satisfied.  Those are:
1. Offer (the buyer made an offer to purchase)
2. Acceptance of the offer.  (You must have accepted it as you plan to close next week)
3. Consideration (something of value changes hands - normally that's EMD /deposit). 

Unless you had some weird language specifying otherwise, it looks to me that the buyer has a case, because a contract has been formed. 

This, it seems to me, is all on you.  You listed at a price lower than you wanted and somebody bought it. 

I get that in the red hot seller's market, one strategy is to list low and get a bidding war going.  But it sounds like you accepted the offer and formed a contract when you did so. 

If I'm reading this correctly, this is a serious mistake on your part and you could be sued for specific performance, meaning that a court will force you to honor the terms of the contract.  This is Contract Law 101 and I'll bet your attorney will agree.  The only way out is if the buyer fails to meet any of the other terms of the contract.

BTW, put yourself in the buyer's shoes for a moment.  The asking price was $1.00, but you really hoped for $2.00.  He offered $1.10 and the appraisal came in for $1.15, which he agreed to pay.  Now you want him to pay $2.00 for a house that just appraised for $1.15.

Why should he pay more than the actual value of the house?  Just because you want more?

Good luck.  Honor the contract you signed and close on the sale.  Take your lumps, learn a lesson and move on to the next deal.
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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    What is in writing? The buyer either has or has not waived the appraisal gap contingency either choosing to proceed to closing or cancelling the deal. Waiting to hear something is not contractual unless you are within the contingency period and the buyer has time to either cancel or waive. Some documents and notices should’ve been exchanged if you are out of the contingency period

    2Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    What is in writing? The buyer either has or has not waived the appraisal gap contingency either choosing to proceed to closing or cancelling the deal. Waiting to hear something is not contractual unless you are within the contingency period and the buyer has time to either cancel or waive. Some documents and notices should’ve been exchanged if you are out of the contingency period

    Buyer has not waived the appraisal contingency. The issue is they have also not told that they are terminating. From my side, I have signed a notification that unless buyer immediately terminates contract, we will assume that closing will happen as scheduled for the contract price. What is my course of action here? The broker just says they are waiting to hear from the other broker.

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    Not being familiar with your area’s standard forms I’d say that 99% of the appraisal contingencies I’ve seen either expire automatically (the buyer waives it) or require the buyer to give notice of low appraisal at which point the deal is either renegotiated or cancelled depending on what they say in their notice.
    Check that language. If what I am used to is mirrored in your PSA and you (or your agent) haven’t received any notices, your buyer waived the contingency and you keep earnest money if they fail to close (unless there are other contingencies allowing the buyer to terminate).

    0Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    Not being familiar with your area’s standard forms I’d say that 99% of the appraisal contingencies I’ve seen either expire automatically (the buyer waives it) or require the buyer to give notice of low appraisal at which point the deal is either renegotiated or cancelled depending on what they say in their notice.
    Check that language. If what I am used to is mirrored in your PSA and you (or your agent) haven’t received any notices, your buyer waived the contingency and you keep earnest money if they fail to close (unless there are other contingencies allowing the buyer to terminate).


     They sent a notice saying it underappraised and they will go $5k over. We sent a notice that unless they terminate, we are assuming that closing happens as scheduled for the offer price to which I have not heard back.

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y
    Quote from @Abdul Azeez:
    Quote from @Sergey A. Petrov:

    Not being familiar with your area’s standard forms I’d say that 99% of the appraisal contingencies I’ve seen either expire automatically (the buyer waives it) or require the buyer to give notice of low appraisal at which point the deal is either renegotiated or cancelled depending on what they say in their notice.
    Check that language. If what I am used to is mirrored in your PSA and you (or your agent) haven’t received any notices, your buyer waived the contingency and you keep earnest money if they fail to close (unless there are other contingencies allowing the buyer to terminate).


     They sent a notice saying it underappraised and they will go $5k over. We sent a notice that unless they terminate, we are assuming that closing happens as scheduled for the offer price to which I have not heard back.


     Wrong. But again depends on your contract. You can’t send a notice “assuming” the deal is still alive. The contingency is likely in their favor. They gave you notice of low appraisal and complied with their $5k gap. If the deal is not at that price point, there is no deal. The deal is off but you can renegotiate. Your response of “thanks for complying with the terms of the original deal but we’ll assume we are moving forward with a price point outside of the original deal anyways unless you tell us to the contrary once again” doesn’t work and is not a renegotiation. There might be more to it. Very hard to comment without having reviewed the transaction docs…

    3Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:
    Quote from @Abdul Azeez:
    Quote from @Sergey A. Petrov:

    Not being familiar with your area’s standard forms I’d say that 99% of the appraisal contingencies I’ve seen either expire automatically (the buyer waives it) or require the buyer to give notice of low appraisal at which point the deal is either renegotiated or cancelled depending on what they say in their notice.
    Check that language. If what I am used to is mirrored in your PSA and you (or your agent) haven’t received any notices, your buyer waived the contingency and you keep earnest money if they fail to close (unless there are other contingencies allowing the buyer to terminate).


     They sent a notice saying it underappraised and they will go $5k over. We sent a notice that unless they terminate, we are assuming that closing happens as scheduled for the offer price to which I have not heard back.


     Wrong. But again depends on your contract. You can’t send a notice “assuming” the deal is still alive. The contingency is likely in their favor. They gave you notice of low appraisal and complied with their $5k gap. If the deal is not at that price point, there is no deal. The deal is off but you can renegotiate. Your response of “thanks for complying with the terms of the original deal but we’ll assume we are moving forward with a price point outside of the original deal anyways unless you tell us to the contrary once again” doesn’t work and is not a renegotiation. There might be more to it. Very hard to comment without having reviewed the transaction docs…


     Not assuming but expecting. I did not use the right language above.

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    Ok. So you are less than a week away from closing and the buyer hasn’t responded to your “counter offer” (did it have an expiration date on it). The devil is in the details somewhere but the fact that the earnest money hasn’t been refunded is probably a good sign. I speculate your agent is working on the back end hoping to piece this back together and get it to closing. Maybe your agent and the buyer’s agent are negotiating reduced commissions to keep everyone happy. Just pure speculation at this point!

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  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    Ok. So you are less than a week away from closing and the buyer hasn’t responded to your “counter offer” (did it have an expiration date on it). The devil is in the details somewhere but the fact that the earnest money hasn’t been refunded is probably a good sign. I speculate your agent is working on the back end hoping to piece this back together and get it to closing. Maybe your agent and the buyer’s agent are negotiating reduced commissions to keep everyone happy. Just pure speculation at this point!

    My notice back to them said the following.

    Contract does not require seller to take less than contract price. Unless buyer immediately terminates the contract due to appraisal contingencies, seller will be expecting buyer to pay original sales price.
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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    I am not an attorney but that language is very fuzzy and I suspect may be non binding. A contract is a two way street. One party “expecting” (or assuming as you previously mentioned) another party to do something accomplishes nothing. I bet you the original PSA  language and the buyer’s follow up low appraisal notice formally terminated the deal whether or not they expressly stated so when filling it out and the agents are duking it out trying to keep the deal alive. You are less than a week away (or actually less if they are financing it and their lender would need to the disclosures to them in advance of closing). Wait it out. If they do walk, I wouldn’t hold my breath on keeping their earnest money…

    1Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    I am not an attorney but that language is very fuzzy and I suspect may be non binding. A contract is a two way street. One party “expecting” (or assuming as you previously mentioned) another party to do something accomplishes nothing. I bet you the original PSA  language and the buyer’s follow up low appraisal notice formally terminated the deal whether or not they expressly stated so when filling it out and the agents are duking it out trying to keep the deal alive. You are less than a week away (or actually less if they are financing it and their lender would need to the disclosures to them in advance of closing). Wait it out. If they do walk, I wouldn’t hold my breath on keeping their earnest money…

    So is this an agent issue? Should I replace?
    0Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    It could be or it could be something else. Personally if I were the recipient of the notice you quoted, I’d shred it because it is meaningless. If I were representing your buyer, I’d tell them the notice means nothing and they can do whatever they want but there might be an opportunity to renegotiate. And I’d also know that I could string you along while I consider my options and come to you at the eleventh hour and say something along the lines of: we’ve officially been out of contract for a few days and my clients have been thinking about it very very hard, that’s why we haven’t yet pulled earnest money. Closing was scheduled for tomorrow and my clients are still willing to but the appraisal simply doesn’t support your asking price. My clients are still willing to close tomorrow based on appraisal plus $5k but not more. This is not a counteroffer because we are out of contract but I need your decision by 5pm as we’ll be submitting the earnest money refund request or can draft an amendment reinstating the original deal with tomorrow’s closing. The decision is yours. I suspect your additional carrying costs might exceed what you have in front of you and relisting in today’s softening market likely wont produce a better buyer ready to close tomorrow. Looking forward to hearing from you by 5pm. Time is of the essence on this

    2Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    It could be or it could be something else. Personally if I were the recipient of the notice you quoted, I’d shred it because it is meaningless. If I were representing your buyer, I’d tell them the notice means nothing and they can do whatever they want but there might be an opportunity to renegotiate. And I’d also know that I could string you along while I consider my options and come to you at the eleventh hour and say something along the lines of: we’ve officially been out of contract for a few days and my clients have been thinking about it very very hard, that’s why we haven’t yet pulled earnest money. Closing was scheduled for tomorrow and my clients are still willing to but the appraisal simply doesn’t support your asking price. My clients are still willing to close tomorrow based on appraisal plus $5k but not more. This is not a counteroffer because we are out of contract but I need your decision by 5pm as we’ll be submitting the earnest money refund request or can draft an amendment reinstating the original deal with tomorrow’s closing. The decision is yours. I suspect your additional carrying costs might exceed what you have in front of you and relisting in today’s softening market likely wont produce a better buyer ready to close tomorrow. Looking forward to hearing from you by 5pm. Time is of the essence on this

    That's why I am asking, is this the work of an inexperienced realtor representing the seller and should I consider switching?
    0Reply
  • Sabrina Sanchez
    Real Estate Agent · Worcester Ma · Member since 2019 · 118 posts · 117 votes
    4y

    Hi Abdul, 

    Are you in a rush to sell and are the other offers offering more or a gap? Typically when a house doesn't appraise you would renegotiate, but it does depend on the contract and contingencies. I wonder what the difference was in the current offer (appraised value plus 5k) and the one you were hoping to get? Is it significant and is it worth fighting for if others might face the same appraisal issue? This offer at least offers you a 5k gap and you won't have to start from scratch with another offer. 

    0Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    Don’t have a black and white answer without being privy to the entire transaction. The best suggestion I have is wait it out. It’ll either play itself out and close or you’ll have a mess of an earnest money refund to deal with (again based on the limited info you shared I don’t think you’ll get to keep it). If you’d rather have the answer now, call your agent’s managing broker - they’ll review the transaction.

    0Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    Don’t have a black and white answer without being privy to the entire transaction. The best suggestion I have is wait it out. It’ll either play itself out and close or you’ll have a mess of an earnest money refund to deal with (again based on the limited info you shared I don’t think you’ll get to keep it). If you’d rather have the answer now, call your agent’s managing broker - they’ll review the transaction.

    Managing broker has been in the loop on all comms. He has also had difficulty getting in touch with the buyers broker.
    0Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sabrina Sanchez:

    Hi Abdul, 

    Are you in a rush to sell and are the other offers offering more or a gap? Typically when a house doesn't appraise you would renegotiate, but it does depend on the contract and contingencies. I wonder what the difference was in the current offer (appraised value plus 5k) and the one you were hoping to get? Is it significant and is it worth fighting for if others might face the same appraisal issue? This offer at least offers you a 5k gap and you won't have to start from scratch with another offer. 


    About a $9k difference between offer and the appraisal plus $5k contingency. They have not come back with a response to our notice.

    0Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    Don’t have a black and white answer without being privy to the entire transaction. The best suggestion I have is wait it out. It’ll either play itself out and close or you’ll have a mess of an earnest money refund to deal with (again based on the limited info you shared I don’t think you’ll get to keep it). If you’d rather have the answer now, call your agent’s managing broker - they’ll review the transaction.


     If they don't close on time and given that we have notice I expect they will forfeit the earnest deposit.

    0Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    They are stringing you along. Has anyone called the buyer’s agent’s managing broker? Can’t believe nobody can get a definitive decision in four days unless there are very very extenuating circumstances 

    0Reply
  • Tom CarrollPro Member
    Real Estate Agent · Avon, CT · Member since 2020 · 11 posts · 9 votes
    4y

    As an agent in CT I can only speak to what we do here. If the language in the contract was "In the event that the homes does not appraise at the purchase price, Buyer will pay upto $5,000 over appraised value not to exceed the purchase price"

    In the event that you are talking about, you as the seller accepted the potential that it may not appraise and even with the gap you may not get the agreed upon contract price. You would be out of luck and the buyers would have the right to sue you for specific performance in my market of CT based on what I read. 

    2Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Sergey A. Petrov:

    They are stringing you along. Has anyone called the buyer’s agent’s managing broker? Can’t believe nobody can get a definitive decision in four days unless there are very very extenuating circumstances 

    Yes the managing broker on my side said in Friday he is waiting on a call back. He said today that he spoke to buyers broker and they are going to see if they can find the difference in price to bring to the table but zilch after that. These updates are now reaching a point where they are not very helpful unless something really happens .
    0Reply
  • Tom CarrollPro Member
    Real Estate Agent · Avon, CT · Member since 2020 · 11 posts · 9 votes
    4y
    Quote from @Abdul Azeez:
    Quote from @Sergey A. Petrov:

    They are stringing you along. Has anyone called the buyer’s agent’s managing broker? Can’t believe nobody can get a definitive decision in four days unless there are very very extenuating circumstances 

    Yes the managing broker on my side said in Friday he is waiting on a call back. He said today that he spoke to buyers broker and they are going to see if they can find the difference in price to bring to the table but zilch after that. These updates are now reaching a point where they are not very helpful unless something really happens .

     Is NJ an attorney state or an escrow state? I would flip it over to our attorney in this situation and let them handle it. 

    0Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    @Abdul Azeez - bookmark my “at the eleventh hour” comment above and let me know what happens at close of business this coming Friday 😁.

    0Reply
  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    4y
    I'm confused.  You say that the offer came in higher than your list (asking) price, but was less than you were hoping for.

    The buyer met your listing price and offered up to an additional $5,000 to cover any appraisal gap, bringing the offer even further over the asking price.

    If I'm reading you right, you accepted the buyer's offer, but hoped to squeeze even more money out of them based on the appraisal.  That's pretty crappy business on your part.

    IANAL, but if you did accept the offer and EMD changed hands, the three basic elements of the contract have been satisfied.  Those are:
    1. Offer (the buyer made an offer to purchase)
    2. Acceptance of the offer.  (You must have accepted it as you plan to close next week)
    3. Consideration (something of value changes hands - normally that's EMD /deposit). 

    Unless you had some weird language specifying otherwise, it looks to me that the buyer has a case, because a contract has been formed. 

    This, it seems to me, is all on you.  You listed at a price lower than you wanted and somebody bought it. 

    I get that in the red hot seller's market, one strategy is to list low and get a bidding war going.  But it sounds like you accepted the offer and formed a contract when you did so. 

    If I'm reading this correctly, this is a serious mistake on your part and you could be sued for specific performance, meaning that a court will force you to honor the terms of the contract.  This is Contract Law 101 and I'll bet your attorney will agree.  The only way out is if the buyer fails to meet any of the other terms of the contract.

    BTW, put yourself in the buyer's shoes for a moment.  The asking price was $1.00, but you really hoped for $2.00.  He offered $1.10 and the appraisal came in for $1.15, which he agreed to pay.  Now you want him to pay $2.00 for a house that just appraised for $1.15.

    Why should he pay more than the actual value of the house?  Just because you want more?

    Good luck.  Honor the contract you signed and close on the sale.  Take your lumps, learn a lesson and move on to the next deal.
    3Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Tom Carroll:

    As an agent in CT I can only speak to what we do here. If the language in the contract was "In the event that the homes does not appraise at the purchase price, Buyer will pay upto $5,000 over appraised value not to exceed the purchase price"

    In the event that you are talking about, you as the seller accepted the potential that it may not appraise and even with the gap you may not get the agreed upon contract price. You would be out of luck and the buyers would have the right to sue you for specific performance in my market of CT based on what I read. 


     I am not following. My side attorney has already told me I am not at fault here.

    0Reply
  • Abdul Azeez
    OP
    Real Estate Investor · Monroe Township, NJ · Member since 2016 · 468 posts · 85 votes
    4y
    Quote from @Tom Carroll:
    Quote from @Abdul Azeez:
    Quote from @Sergey A. Petrov:

    They are stringing you along. Has anyone called the buyer’s agent’s managing broker? Can’t believe nobody can get a definitive decision in four days unless there are very very extenuating circumstances 

    Yes the managing broker on my side said in Friday he is waiting on a call back. He said today that he spoke to buyers broker and they are going to see if they can find the difference in price to bring to the table but zilch after that. These updates are now reaching a point where they are not very helpful unless something really happens .

     Is NJ an attorney state or an escrow state? I would flip it over to our attorney in this situation and let them handle it. 


     Subject property is not in NJ. The state where it is is an escrow state. nJ is an attorney state.

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