Under the ‘Third-Party Financing Addendum’, you have the right to terminate the contract if a low appraisal does not satisfy the lender’s underwriting requirements for the property. If you decide to waive this right, you waive the right to terminate the contract regardless of how far the appraisal is below the sales price. If the lender reduces the amount of the loan because of the low appraisal, you must cover the difference between the loan and the sales price by bringing additional cash to close.
For example, if you’re seeking a $300,000 mortgage but the appraisal comes in at $290,000. The lender in this case would only be able to finance the $290,000. This leaves you to pay the remaining $10,000 out of pocket, as well as the down payment and other closing costs. This can be good, and bad.
In today’s market it can be incredibly difficult to stand out from the other offers. If you have the financial means to cover the difference in the appraised value and offer price, it might make sense to waive the appraisal. This can make the difference in some cases of having your offer accepted and not. This can go the other direction though. If you do not have the financial means to cover the difference it’s probably best to find alternative options to make your offer shine.
Whatever you do though, make sure you work with a professional FULL-TIME Realtor. They will be able to help you navigate the process and advise you on what is best for you.
If you have any questions or would like to know more about the home buying process or know anyone that would, contact me today.