You have an accepted offer in on a house for $600,000. You have put down 25%. The appraisal comes in at $580,000.
What do you do?
- Firstly, you do not have to pay more than the house is worth, unless your would like to. Meaning you don’t want to risk losing it. Of course this means you would have to come up with $20,000 out of pocket.
- You can walk away from the deal since Item 2 J of the California Residental Purchase Agreement makes the offer contingent upon the house appraising at the value of the offer or above – not below.
- You can present an addendum to the Purchase Contract to the Seller: stating something to the following effect:
The Seller hereby agrees to an adjusted sales price of $580,000 to reflect the current market value.
All other terms and conditions remain the same.
If you back out, the Seller is going to have to accept an offer at $580,000 or less, because the house will probably appraise at that again, and no one else is going to want to pay more that the home is worth.
$20,000 is about 4 months income for the average person. Would you work for 4 months FREE?
Today’s market is not in appreciation mode, so why would you pay more than the property is worth. It could take years to gain back the difference.
Also, it could take several months before the Seller finds another buyer and the value of the house could drop further. This is something the Listing Agent is well aware of, and an agent worth is salt is going to have that talk with his Seller.