Updated about 14 years ago on . Most recent reply
Clause question
Had an offer come in with a clause to sell for appraisal price should it be less than offer price. Has anyone heard of this before?
Most Popular Reply
Any standard financing or appraisal contingency will have this language. It's standard because no lender these days will finance more than LTV on the appraised price of the property. If the buyer wants to pay more than appraised price, they'll have to bring the difference to the closing table, and many buyers don't have extra cash to spend at closing.
If you're selling FHA, the appraisal will stay with the property for 6 months, so if the appraisal comes in low for one FHA buyer, it's easier to just lower the sales price to the appraisal price and be done with it, as all potential buyers for that property will have the same issue for 6 months. If its a onventional loan, you need to decide if the appraised value is accurate or not, and if so, dropping the price is likely the easiest thing to do.
Of course, if the buyer has disposable cash and is willing to pay over appraised value, you can certainly negotiate a price higher than appraised value, but most buyers won't go for that.