What To Do When Appraised Value is Low?

Low Phoenix Appraised Value

It is no secret that the Phoenix area Real Estate market is showing signs of improvement.  2012 has started off with a bang!  With any transitional Real Estate market comes appraisal/valuation challenges.  In fact, stable Real Estate markets come custom fit with appraisal related hurdles from time to time as well.  The most common issue an Arizona buyer faces relative to an appraisal is home value.  Of course, buyers don’t complain when their desert dream appraises for more than what the purchase price is on the Arizona state purchase contract.  However, it is a different story when the appraiser issues a value that falls below the price an Arizona buyer has agreed to pay for the home.

Not to Fear, The Arizona Purchase Contract Is Here!

Arizona buyers are protected by the Real Estate contract used in the Grand Canyon state by something called the appraisal contingency.  The appraisal contingency that is built into the Arizona Real Estate purchase contract provides the buyer with 3 different options when the value comes in below contract price.  Each of these 3 options puts the buyer in control when value is low (unless they waive the appraisal contingency – see below for more).

Arizona Buyer’s Options with Low Appraised Values?

1. Cancel the contract and receive a full refund of their earnest money deposit.
2. Ask the seller to lower their price relative to the low appraised value.  If the seller refuses the buyer can back out and receive a refund of their earnest money deposit.
3. Keep the price the same in spite of the lower appraised value.  In this case, then buyer’s mortgage lender will require that in addition to the minimum down payment required for their particular loan scenario the buyer pay for 100% of the difference between the appraised value and the higher sales price.

The only time that these 3 options do NOT protect an Arizona Real Estate buyer is if that buyer waives their appraisal contingency in writing in the purchase contract and/or when an Arizona buyer’s earnest money goes “hard” (meaning non-refundable) at a specific point which is outlined in the purchase contract.   The appraisal contingency is inherent to the Arizona purchase contract and is in effect automatically protecting the buyer  (again unless it is waived by the buyer).

If you have any questions I am a phone call or email away!

By Jeremy House



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