Dallas-Fort Worth Real Estate Investor Club

Hello Cynthia,

I am a REALTOR®, but I am not an attorney or a Residential Mortgage Loan Originator. You have a contract question, and you should certainly seek a qualified opinion.

If an appraisal was done, is it a function of Buyer's lender and financing? Please refer to your contract and any addendums. From my experience you can often negotiate a lower price with a "bargaining chip" at your disposal. If you are using a 3rd party financing addendum, there are paragraphs that reference Buyer credit approval and lender approval of the property. If your financing is dependent on a certain percentage down payment, the appraisal results determine the Loan to Value (LTV) ratio. in many cases, you can negotiate a new sales price based on the appraisal, or terminate because the Lender won't fund unless someone makes up the difference between the sale price and appraised price. If your contract has a special provision or a clause stating how you can terminate the contract, you can certainly negotiate a lower price, or terminate the contract.

Why did the appraisal came in lower than the contract purchase price? Without knowing how you determined the price of your offer, if you based your offer price on comps you or your buyer's agent pulled, compare the appraisal comps with your comps. Try to learn what the appraiser did and why the appraisal comps are better than yours.

If you are working with a Lender, and/or attorney, and/or a real estate license holder, be sure to ask them for guidance, as they will be knowledgeable of the terms of your contract.

Thanks,

Terry 

Terry, thank you for your comments

Dwayne,  of course I want to offer the lower appraised value.  But given the relationship with the agent, the lack of MLS filing and the paying tenant.  If have a feeling the seller may list the property on MLS  and may get someone else to pay higher than appraised values.  No this is not a rehab .

I agree, call Robin and keep us posted if you would... My initial thought would be to walk, but perhaps there is not enough info out there for me to assess... One of my BIG things.... if the numbers don't look right then walk! 

Brian R. Baker, MBA 

Hello Cynthia,

I expect your positive cash flow is figured after all monthly expenses (including an equivalent monthly tax and insurance payment) are accounted for. As long as the numbers work for you, you have a good deal. Take the time to study this deal and find ways to improve the financials on your next deal. 

Terry