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Waiving appraisal may not be worth risk
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More from Homes StoriesWhen there is competition for a desirable home, some buyers are often tempted to make an offer more attractive to the seller by waiving the home appraisal. What are the implications of this bold strategy? What consequences might the buyer have to face in a "worst-case scenario" transaction?
Although waiving the home appraisal might entice the seller to accept your offer instead of other offers that require an appraisal, you are placing yourself in a vulnerable position. Most buyers apply for mortgage financing and most lenders want the property appraised to ensure that it is worth the full amount they will be loaning you to make the purchase. If the appraisal comes in at less than the price you offered to pay, you are obliged to make up the difference between your offer and what the bank will loan. If the lender's appraisal values the property at $575,000 after you offered $600,000, you will need to come up with an additional $25,000 in cash to buy the house.
Some lenders will not make the loan at all if the appraisal does not match the offer. This means that you will not be able to fulfill the purchase contract. You therefore stand to forfeit all or part of your earnest money deposit to the seller, who can claim the deposit to cover his or her expenses. Not only have you lost money and time, but you must now begin your home search all over again.
You may try to re-negotiate the selling price at this point rather than lose the house. This will not be easy you must convince the seller to lower the price you already agreed to pay for the home.
Since the home appraisal confirms the value of the property for the buyer, seller and lender, waiving the appraisal contingency introduces a risk factor into the transaction process.
(Dave Wallace is broker/president of Alliance Realty Inc. in Ventura. He can be reached 644-1111. On the Web, visit http://www.AllianceRealtyPros.com)
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