Unfortunately the inspiration for this blog post is a deal I am currently working on in Salida. The buyers chose a home with an asking price of $149,900 in VERY good condition. Because they needed their closing costs paid, they offered $154,000 with a three percent seller concession on an FHA loan.
The buyers completed their pest, roof and home inspections and the house passed with flying colors. Then the appraisal comes back- at a low $150,000. Unfortunately this has become commonplace in Modesto and surrounding Stanislaus County. When many comparable sales are distressed they may sell for less than market value which in turn has a ripple effect on other homes in the neighborhood.
In this scenario there are several solutions:
1. Buyer asks seller for a price reduction to the appraised value. If seller agrees, escrow proceeds as normal and the buyer pays less than they originally offered for the home. If seller does not agree, buyer may cancel the agreement. Buyer will likely retain their deposit, but will not get any money back for the appraisal fee or the inspection fees, which total almost $1000.
2. If the buyer is asking for closing costs (as in this example) the seller may agree to reduce the purchase price to the appraised value, but no longer pay closing costs leaving the buyer responsible for the extra expense. They can use their own money, receive a gift from a family member, or adjust their pricing on their loan to receive a credit from the lender to cover the fees.
This scenario has yet to fully resolve itself, but it is my hope the seller will reduce the price and pay for closing costs because that is the best option for my buyer at this point. My main goal is to ensure that every avenue has been explored and the end result is in the best interest of my buyers.
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