Appraisal Contingency?

**lil_grasshopper4** · 01-23-2009, 01:20 PM

It is generally smart to have an appraisal contingency? After discussing my initial price with the seller, I saw a Zillow "zestimate" of approximately 4% lower than comparable prices, and lower than my offer price. My concern is obviously the amount that will be obtained in financing in the event the appraisal comes in low.

My current hope is that if we agree on price, I will include an appraisal contingency, and if it comes in lower, than we re-negotiate..

**markbrian** · 01-23-2009, 01:30 PM

Yes, a contigency based upon the property appraising for the purchase pirce is a good idea.

But never ever put too much faith in a Zestimate. It is only a ballpark figure.

And I must assume you are thinking about buying without professional representation. All my offers have several different contingent sections in them. You really need to consider getting professional help before you end up losing much much more money than the relatively small commission. And since you are a buyer, the buyer's agent commission is usually paid for by the listing broker. Free proefessional help or risk at the minimum losing your earnest money.

**lil_grasshopper4** · 01-23-2009, 01:38 PM

Thank you so much for your reply Mark. Yes, I am in negotiation for a private sale, but in the event we come to an agreement, my plan was to work with an attorney to draft the offer / contract with the appraisal contingency as well as the standard inspection clauses, etc. Is this pretty standard on the buyer's end in a private sale?

Dumb question - but is it stupid to even get this thing off the ground if I feel that the appraisal might come in low? Hence the contingency, I suppose. The seller is about to pay two mortgages and I know that he is getting antsy.

In addition, the listing has just expired and there is the 90-day clause that the agent/broker are entitled to their commission if a private sale closes within 90 days of expiration. Does an official contract (with attorneys) violate this as well? According to the seller, no. But I feel it would be wise to put something in the contract..

**Codythebest** · 01-23-2009, 02:20 PM

Don't listen the seller, it will make a difference.
Don't trust Zillow as well. It's coming only with what people put in, i.e. not everything.
If there are few foreclosure in that neighborhood, the appraisal value will drop. Good deal for buyers today...

**Greg** · 01-24-2009, 05:03 AM

With the difficulty getting loans these days you had better have a loan contingency in your offer.

Please come back and let us know how much money you saved working with a lawyer. I have yet to find one who works for cheap and some of them charge a percentage in deals like this.

**jpoey** · 01-24-2009, 11:25 AM

zillow sucks!!!!

**LVrealestateHELP** · 02-06-2009, 12:13 PM

ALWAYS us an appraisal contingency. It protects you as the buyer from getting locked into a home at a higher price than the home is worth. If the appraisal comes in lower you should renegotiate the purchase price lower. If that is the case you might want to rethink the deal entirely. There are so many deals out there selling for WAY below FMV. Why settle for FMV? Above FMV is totally unacceptable in this market. Just my 2 cents.

**jennsellsfast** · 02-07-2009, 01:42 PM

Yes this is one Addendum you have to use in this depreciating market. Homes have dropped so fast and far that nobody knows what anything is worth anymore.

**donrock** · 02-07-2009, 10:06 PM

lil grasshopper4,

As an ex-appraiser I'll answer two of your questions. First of all DO NOT try to use Zillow as a measure of value. Second most appraisers will try to bring the value in at the sales price especially the lazy ones. I was a review appraiser and ran into this all the time,
Also normally the 90 day rule for the RE agents is that they worked with the buyer, if not they shouldn't get anything. Check with MLS or a RE agent that you trust to tell the truth (might be hard to find).

Good luck,
donrock

**markbrian** · 02-08-2009, 07:08 AM

The safety clause or int his case 90 days, does not matter whether or not the buyer was working with the listing agent. If the buyer became aware of the property thru the agents marketing, then the agent has earned the commission.

And to find an agent you can trust is not hard at all! It just means you hire an agent to work for you! If you think the listing agent, or a subagent of the listing broker/agent is going to get you comps that support a lower price you are wrong. So many people do not understand that the listing agent's job is to get as much as possible foe the seller, because that is their job and they work for the seller to acheive this goal.

But a buyers agent works for the buyer. And as weird as it sounds, they are paid by the listing agent/broker. But their job is to represent the buyer and get the best deal for the buyer. They are legally bound by the contract to work for the buyer and work to acheive the buyer's goals.

Many people get confused because they do not understand the different goals of agents. WHO the agent works for is the key to understanding whether or not they are actually trying to help you or are just being nice.