Hi all! Looking to get some feedback on this topic if anyone has experienced the same difficulty. Often when I get offers that are above asking, the seller will state that they are willing to "waive the appraisal", assuming the appraisal will come in lower than their offer. I have fallen into this tempting trap twice now, only to have the seller's attorney immediately wipe it out during Attorney Review (I am in NJ which is an attorney close state). I am then left with the decision of walking away from that buyer or accepting it and moving forward with them.
I was hoping to hear if people on BP have experienced the same thing and how they get the waiver to stick knowing the seller's attorney is always going to talk them out of it. This scenario is assuming that the buyer shows proper proof of funds that they can cover the loan gap between the property's appraised value and purchase price.
As a follow up, or side question, if someone offers above/well-above asking without offering to waive the appraisal, what's the best thing to do to hold them to that purchase price if the appraisal ends up coming in well below their offer?
Appreciate any and all feedback!
2nd question first, I would think that really wouldn't be a concern of mine. If they want to walk away from their EMD then so be it, just make sure it's a reasonable amount. To address your first question I'm not sure if you've mistakenly put buyer where it should say seller and vice versa in a few places making it difficult to follow or if it's just me. I'm guessing your question is supposed to address a situation where a buyer puts in their offer that they're willing to waive an appraisal (which I think really should be waiving financing contingency since a low appraisal by itself isn't a reason to back out of a deal) then have their attorney take it out during attorney review. I don't know that you can prevent it up front, but yet I'd walk away if you're getting so many above asking offers at that point in the process.
Yup, totally did that. Everywhere I wrote "seller" should be "buyer". I typed this quickly. Sorry for the confusion and thanks for the response.
"the seller will state that they are willing to "waive the appraisal""
In OR and do comm RE on apartments.
I don't know about waiving appraisal, but if a buyer waives the financing contingency upfront, it means he can't use failure to get financing as a reason to refund his E/M (assuming that's damages if he doesn't close).
Am kinda curious how stuff works in NJ. Whose the atty doing the close? Buyers, sellers or neutral? I'm finding it hard to believer they can cross out something mutually accepted by two knowledgeable parties legally.
If you have done due diligence have ordered an appraisal how can next appraisal comes back low?
Thanks for the feedback Steve and Sam.
In NJ, the seller and buyer each have their own RE attorney representing them. When the buyer presents their offer to the seller, typically through their real estate agents if house is on MLS, it may or may not have other agreed upon terms in addition to the purchase price (like agreeing to waive the appraisal regardless what it comes back at, among other things). If seller agrees to the offer, at this point, both buyer and seller sign a Purchase/Sale Contract outlining the offer which then goes to each party's respective attorney for the "Attorney Review Period". In NJ, this is typically around 3 business days, but could be longer depending upon how much back and forth there is between the attorneys. During this time, the attorneys review the offer, the contract and everything else related to the property and proposed deal, working to protect their clients and ensuring that they understand the many different facets of the deal and contract they signed. It is during this AR period that the buyer's offer to waive the appraisal typically gets IMMEDIATE pushback from their attorney in order to protect their client. Since the property is not yet officially "Under Contract" until after the Attorney Review is complete, and since no home inspections or 3rd party appraisals are performed, and no EMD is collected until it is out of AR and "Under contract", the appraisal is still very much a wild card/unknown variable (especially in situations where the offer is above asking). The buyer's attorney I'm sure scares the hell out of their client explaining what waiving the appraisal really means and that they could possibly have to come out of pocket 10k, 15k, 20k+ to cover the loan gap if it comes in low. The buyer usually gets scared and has their attorney try and strike it from the offer during the AR period, forcing me to make a decision of going forward with this buyer and rolling the dice on the appraisal, OR dumping them and going back to the well of other offers I may have had.
So...I'm wondering if anyone has come up with a way to get that offer to waive the appraisal to really stick and hold up through Attorney Review??
OK, now I understand. I like working with attys sometimes and some of them drive me nuts.
If they're convinced waiving appraisal is a bad idea (which I can see), I don't know if you have much of an option if NJ encourages atty review (which is not a bad idea otherwise).