Appraisal and estoppel questions

18 Replies

Hello BP family,

  I’m under contract on a triplex in Propspect Park, PA, Delaware county. The property just appraised for $5k over the sale price and the deal in still on, 2 weeks until settlement. Property as is- where is.

First, the sellers agent requests a copy of the appraisal which I was told by my lender and agent that it’s not common or recommended to share the appraisal and I’m not obligated to. The selling agent insists that the agreement of sale entitles the seller to copies of inspections and appraisal. I haven’t seen this anywhere in the AOS. It’s a standard Pennsylvania of Realtors AOS agreement. Is this true? 

I don’t see any harm in sharing since the appraisal came in only $5k above our agreed price but I requested a few things that they are dragging their feet with getting back to me so I don’t want to rush getting them something that isn’t even required, to my knowledge.

The current owner is older and responds very slowly. The property is owner managed and very poorly managed I must add. The leases are sloppy, incomplete and not even sure if actually binding. 

When the tenants found out the owner was selling, he agreed to extend everyone’s lease one year. When they gave us copies of the leases, all he did was change the ending lease date to 2019 but signatures are from 2016 and they don’t have a lease amendment and seller and tenant didn’t initial the change on the lease.

I’ve requested and supplied an estoppel form to be fully filled out and signed by tenant and owner and for the leases to be initialed properly for the recent changes.

Selling agent says he can’t make tenants fill out estoppel and owner isn’t making much effort to get it filled out either. Without an estoppel form or legally binding leases, I can see problems coming up in the near future that I’m trying to avoid. 

Should I just request they make new leases that are properly filled out with proper signatures? 

I could even supply them with my lease with the current owners name since I will be bound to the current lease after property transfers to new owner (me).

Thanks in advance for any advice you can provide and please let me know if you need anymore info.

I would let the lease sleeping dog lie.....right now it appears they have no binding lease, so you have flexibility to put them on month or make them sign Your lease.
Not familiar with PA contracts but I’ve never seen a requirement where the buyer Had to supply even inspection reports, let alone appraisals unless there was s appraisal clause you were taking advantage of. To the listing agent, simply “show me in the contract where I have to provide those”.

@Wayne Brooks thanks for your reply. You’re right, I will just ask the selling agent to show me where it’s stated in the AOS.

For the leases, I didn’t really like the thought of inheriting tenants because I didn’t get to do a credit/background check or check their application. So their leases expire January 1st 2019. After that I’d like to raise the rents and have all tenant reapply if they want to stay. But until then (the next 6 months), I’m stuck in this sloppy lease and feel a little vulnerable without a solid lease in place. That’s why I requested the estoppel so the main terms were clear on this form, where it wasn’t clear on the lease. 

If the leases currently in place are not binding, do I simply let them each know they are technically on a month to month when they thought they had to the end of the year. Give them a 30 day notice and a option to renew for 1 year with my new lease agreement after they reapply and at higher rent or just lets things float until the leases expire 1/1/19.

I don't believe that a clause requiring the buyer to give the seller a copy of the appraisal is part of the PAR agreement. Last house I sold, I did insert such a provision. There are good reasons for requesting it. But I do recall having to explicitly spell that out.

Well, buyers sometimes want wacky repairs based on their inspection; if appraisal comes in a good bit above contract, I might be more willing to avoid agreeing to repair everything - especially if I had to give a seller assist.

And if I have another nearby property to be sold soon that is similar, I can use that appraisal to help come up with a better asking price for that other property.

Hey @Stephen Barnabei congrats on the deal! I don't think the standard PAR agreement requires you to give the seller anything unless they added it like @Steve Babiak said. Best reason I could think that the listing agent wants the appraisal is in case your deal falls through they can justify their price to any future buyer. Sounds like @Steve Babiak has some more thoughts though. 

I'm not a lawyer but I have to imagine you can get the tenants to sign a new lease now with your name and everything on it that is contingent upon this sale going through. I think you are right when you said that since the current lease is not binding then you can go and get them all to reapply at a higher rent. 

@Steve Babiak thanks Steve, that’s a great idea and I’ll be sure to use it when I’m selling my next home.

@Rich O'Neill thanks Rich. Yes that make sense. My original thought was the seller was getting cold feet and wanted to make sure he wasn’t giving the property away at a low price and may wanted to find a way out of the deal. The listing agent could use it to justify price if deal falls through. Even my realtor asked for a copy of the appraisal because he owns several properties in the area and is interested in the report. I paid $550 for the appraisal, if everyone is so “interested”, they could all chip some cash for a copy of the report haha 

@Stephen Barnabei I totally agree. I think that is why it is left out of the PAR agreement. You are technically owner of that data and you do not have to share it unless you want to. 

@Stephen Barnabei

A few thoughts: 

  • Under the PAR Standard Agreement of Sale ("AOS"), I believe the seller has the right to demand a free copy of the title commitment, mortgage documents, and any inspection reports. I suppose one could try to argue that the term "inspection report" includes appraisals as well. I don't use that form that often so I'm not 100% sure. 
  • As for the tenant estoppels, the AOS does not require the seller to provide any such info to the buyer. If you want that, you have to add such language as an addendum. If you did not do so, you are obligated to buy the property regardless of whether you receive the estoppels. 
  • Speaking of that, did you elect to include the Tenant-Occupied Property Addendum as part of the AOS? That more or less serves a similar function as the estoppels except for that the tenants are not a part to that Addendum. If not, unfortunately you are too late.

As for the lease issues themselves, I would ideally have the tenants sign a new one (or at least sign a document confirming what the seller is telling you). Unfortunately, whether you can demand that depends on what you agreed to in the AOS and the addendums. I would review your documents to see what they say.  

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Chris K. thank you Chris, your input is very helpful. Yes, I suppose the term “inspection report” is arguable if it mean buyers inspection but since the appraisal is a lender requirement, I would personally say it’s not an inspection, rather an evaluation. That’s just my assumption and it holds no water.

For the estoppels, I was hoping they would fill them out but I understand they are not obligated by the agreement and there is not a amendment adding the estoppels in our agreement.

We do have a signed TOP addendum so I’m glad that kind of helps the situation which I was not aware of so thank you again for bringing that to my attention.

Yes, it would be ideal to get new leases signed under my terms after I take ownership of the property. I’m trying to be proactive and see further issues and already have answers for these issues before they happen. Thanks for your advice!  

@Wayne Brooks @Steve Babiak @Rich O'Neill @Chris K.  just in case you were curious or anyone else that wants to know. I read the entire  Pennsylvania Association of realtors  (PAR) AOS, under “Buyers Due Diligence” line 294 (A) #5 it states:

“ Seller has the right, upon request, to receive a free copy of any inspection report from the party from whom it was prepared. Unless otherwise stated, seller DOES NOT have the right to receive a copy of any lenders appraisal report. 

I just put another building under contract yesterday, One the PAR contract It specifically states that the seller does NOT have the right to the appraisal, (on page 6 of 13).

As @Chris K. says (my modified version) "although I'm NOT a lawyer, I did say in a Holiday Inn at one point". Seriously, best to run the legal stuff through the proper resources. The form says all other "inspections" (at least the one that we just executed), and your free to make whatever changes you want... but get it done before they agree to it. 

Personally I NEVER give up my appraisal unless its under sales price (of course I have a contingency for just that too - dont you?)... and even then its at the last possible second (negotiating).

@Stephen Barnabei :

Interesting! I don't see that on my old copies of the forms. But I suppose they may have a new version or someone modified it. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Matt Avila

Your comment made me think of this video :)

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.