cash offer wants appraisal AFTER contract signed.

20 Replies

We have a cash offer on our house and we have met all of the contingencies set forth in the contract.  Now the buyers wants an appraisal for his "personal" use.  We are very hesitant to let him do it, for prices have gone up faster in our area than the appraisers can grasp and we got a good offer.

Does the buyer, by law, have the right to get an appraisal now that all contractual obligations have been met?  We think it is a back out clause for them if it does not appraise.  Of course we may get to keep the earnest money but we really want to close.  All contingencies have been signed off and this is a new out of the blue request.

Would need to see the full unredacted text of your contract with the buyer to answer. Most of them allow the buyer to perform various inspections, within reason, even if there are no contingencies. 

I'm actually surprised you knew it was for an appraisal. If a buyer, I'd just say it was an inspection so I can plan for what upgrades/fixes that I'd need to do on the house after closing, which is a true enough statement, it's called an appraisal "inspection" when the appraiser visits the property. 

Thanks for the reply. We are past the 10 day discovery/inspection date the earnest money has been released so now all we do is wait for the closing and we still live in the house.  I don’t believe a buyer has the right to start sending in subs to get bids on what projects they would like to do after closing. They get a final walk through just before closing and other than that the house is not theirs to do as they please.  

@Rick Harmon   Do you think the buyer paid well over the market value? If you think there's a risk the buyer backs out and you have no contractual obligation to allow the appraisal then you have no reason to allow it. You can also decline due to timing reasons. In many markets appraisers are backed up and taking 15-30 days longer than usual. 

Ask why the buyer wants the appraisal. If they say to confirm value, then don't allow. If they say it's to get a jump start on any repairs, then ask for additional earnest money. 

If they have released their earnest money to you their deposit has gone hard, then why bother being combative? When we purchase we often are cash offer and intend to finance or refinance ASAP to keep that cash moving into future deals, so sometimes we can close cash but could end up closing with financing if we can get all the ducks in a row in time to save some costs with running title twice and other closing costs. 

In reality they can back out and loose their deposit regardless, I would just make sure to put time is of the essence or something of the sort to make sure you are honoring the timeline set forth in the contract, and also maybe ask them for an updated proof of funds to verify they are still closing

@Rick Harmon Maybe he wants to finance after all but has cash in case he cannot. why worry, borrowed funds are the same as cash out of a savings account. maybe he wants to use as collateral for something else or is paying cash out of a sdira.

I am responding to all of the above in one reply. 

 We close in 2 weeks so I doubt that a lender can get financing locked in and completed in 2 weeks, the housing market is in a boom and everyone is pushed to the limits. Plus the home owner is paying for the appraisal so it is not a lenders appraiser.  

The house is not an investment house, it is an estate valued at well over a million so they are not searching for their next big score.  

The house is a "special" case with two huge out buildings one being a massive modernized gambrel style dairy barn and the other is a custom build shop/rv garage and many inspectors to not give a fair value to out buildings so it may not appraise at the agreed upon price. The COVID bounce is real and many homes across the country are not appraising at sale price causing buyers to bring extra cash to the table to cover the difference between the asking price and the appraisal price.  

We don't want to be combative but these buyers have been flaky since the beginning with low communication and response times. And feel they are just looking for an excuse to back out or ask for a lower price.  We had an offer of $75,000 more that was a financing offer but we took this one because it was cash and would not to meet the appraisal standards.


Originally posted by @Rick Harmon :

 I don’t believe a buyer has the right to start sending in subs to get bids on what projects they would like to do after closing. They get a final walk through just before closing and other than that the house is not theirs to do as they please.  

 It always goes back to the contract.  What does yours say?  I don't see a state so I can't check.  But I would wager that it says something along the lines of (from Florida FAR/Bar As-Is) :

shall, upon reasonable notice, provide utilities service and access to Property for appraisals and inspections,
including a walk-through (or follow-up walk-through if necessary) prior to Closing.

However that gets interpreted is up to the courts but it does not say that only time inspections can be done is during the option period.  

Inspections can be done whenever. The option period just specifies the time when the buyer has the right to their option/EMD back if they cancel. At least in our As-Is contract in our state. The wording says that the seller shall provide access.

@Rick Harmon "We don't want to be combative but these buyers have been flaky since the beginning with low communication and response times. And feel they are just looking for an excuse to back out or ask for a lower price. We had an offer of $75,000 more that was a financing offer but we took this one because it was cash and would not to meet the appraisal standards."

I think you're absolutely right.  Here's what I can foresee:  they get an appraisal, realize it's $150,000 (or some massive number) less than contract price, decide to forgo earnest money and cancel the deal.  

If you're closing in two weeks they can wait.  In the meantime, you might want to get your realtor to ask other offerors if they'd still consider buying at current contract price.  

Patrick that is exactly our thoughts.

Dan, we are in the state of Washington and our contract does not have that wording or clause.  Ours just says they have the right for an inspection and a right to refuse the inspection.  

Thank you

I would start lining up another Buyer just in case, but I had this happen recently where a Buyer of mine wanted to hail mary some financing and required an appraisal.  The Seller allowed it, through some miracle, on the basis of: we are still 100% sticking to the set closing date - if financing can pull it off, great!  If not, we're still moving to close with cash.

In your case, the Buyer got caught up in the act of getting the property and through the inspections and seeing everything, likely figured out that he/she won't be able to finance it after closing and is trying not to eat it.  Plus , if it's over $1MM for a personal home, I think as an Agent, I'd be completely out-of-line if representing the Buyer to NOT have them get an appraisal.

Just be as amenable as possible and let them know that you are planning to stick to the closing date with zero delays and if they feel they can get an appraisal completed before then, go for it but if not, then it would be best to wait until after closing - I bet they'll wait.

You don't have to allow it pre-closing and I don't think it's being combative by not allowing it if they aren't specifically saying it's because they are going to refi out, but if they are doing that they might need 6 months seasoning so it's not really urgent. As a seller, you should always trust your gut and if they've been flaky, they may remain that way. How much earnest money is down? But on the other side, as many have said, they may just be doing it to get ahead for later. It sounds suspect to me though. If I was going to pay cash and then flip it into a loan, I could wait another two weeks.

@Rick Harmon did you’re realtor get that other offer signed as a backup? That would have been my strategy. I’ve sold and bought all but 1 of my properties in backups. **** happens and it gives you a leg to stand on and negotiate assuming the backup still is interested...

How much is the earnest?? 

1. If it's in excess of one months PITIA, then let them do it.

2. If it's not, get an addendum and a new check to cover the amount of PITIA money you'd lose if they backed out and you had to get another deal closed.

This is why earnest is there.  So they pay for possible financial damages up front.

Buyer CAN do anything they want.  If they want a 3rd party appraisal and THEY are willing to pay for it, all good.

But it does nothing to the contractual agreement unless it was in the original agreement.  If the appraisal is not any good, they walk away from the deal and you keep the earnest money.

Simple.  Don't sweat it.  I wouldn't.  You can probably raise the price by 10% if they don't follow thru!  ;-)

@Rick Harmon

Didn’t read everyone else’s replies be if the contract selects payment as cash and there is nothing checked or selected that mentions a financing contingency or appraisal contingency your buyer is out of luck. They can appraise after closing. OR you can let them appraise because it doesn’t matter what the report says

We just talked to a real estate attorney. Once the contingency/inspection  time frame is completed and everything is agreed upon  the buyer has NO right to enter the house unless the seller gives them permission.  In the state of Washington.  The seller has rights to enjoy the property just as a tenant would have the right until the home is no longer theirs. Just because you have an offer on a property does not mean you have a right to rule the lives of the sellers.  

@Rick Harmon - like they said, ask the buyers to clarify if they are trying to get some financing. If so, consider allowing the appraisal inspection with an addendum that also says earnest money is non refundable and will be forfeited if they do not close on X day (existing closing date). Then, proceed with the higher priced financing offer (or go back to active) asking for an appraisal waiver of $x so the minimum total is at least $25,000 over the previous cash offer. The purchase interest rates are much lower than cash out refi interest rates and over time that can save the buyer a lot of money and not cost you anything.

I use a technique of giving the appraiser a sheet with $$$ values of recent work done to the property and they bump up my value so it’s good enough for the contract. I’ve never had an appraisal come in low except my first sale ever and I told the buyer day 2 that we were going to come in at x price. It was listed for like 230k and we offered 215k (buyer’s suggestion so I wrote it up) and they accepted it. then I ran comps and the highest that model had ever sold for was $195k. So I said, hey buyer, this townhouse is only worth $195k and the listing agent said ok we will sell it for $210k, and the appraisal came in at $195k. The buyer had offered the $215k and I had just written it up. (This was in 2016, previous to all these current market shenanigans).

Anyway. Good luck with your sale. If you don’t want to let them back in, that seems to be your right. I once wrote a cash offer for a client planning to use a hard money lender as backup and then they sent 3-4 requests from different real estate agents for “BPO” type appraisal “inspections” without my knowledge and I was disappointed with the hard money company (dohardmoney) based on what I had discussed with the listing agent.

@Rick Harmon In New Hampshire it’s standard to have 10-14 days for inspection and review of HOAs, Rights of Ways, etc. most appraisals are conducted after this time period as their time window is out so far. My closing has been extended 30 days on my current property due to the bank appraisers being so far out.

I have had an appraisal ruin a large sale like the one your talking about so I too would be Leary about allowing it to happen. For 15 years after I put specifically in all my paperwork that that appraisal company was not allowed to be used any more and I never had any other problems.

If they want to do an appraisal so what?  Whoever is more willing to walk away wins the negotiation everytime.  If they back out what's your worst case scenario?  You sell it to someone else for more money? Lol.  I would hope you have a Realtor and aren't relying on random people spitballing on a message board with not a clue of your circumstances beyond what you've divulged in a few paragraphs.  If you don't have great representation that understands your circumstances more thoroughly then...