Negotiations can solve problem of low appraisal
Q. Four brothers inherited a 54-year-old home, a “fixer-upper.” A state-certified appraiser says it’s worth $170,000 or a bit more. The gang is upset and wants to list at $219,000 and hoping for $200,000. If a buyer offers $200,000, but his mortgage company appraises it at only $170,000, what happens?
A. If the property is listed too high, the gang will soon find out because buyers won’t bother coming to see it. But the brothers are free to experiment with price if they have patience and don’t mind expenses for taxes, insurance, utilities and maintenance.
If a buyer’s mortgage company finds the value of the property doesn’t justify a large enough loan, what happens may depend on the wording of the sales contract.
With many contracts, the buyer would have the right to drop out and earnest money would be returned. In practice, though, there’s often some negotiation. The sellers may agree to take less — after all, if they start over again with another buyer, they’re likely to run into the same problem. Or the buyer may find more cash and come up with a higher down payment. Or often, they reach a compromise.
Q. How long after signing a contract to purchase a new house do you have to back out of the contract?
A. The whole point of a signed contract is that it is binding on both parties immediately. The law sometimes allows just a few days for canceling the purchase of certain subdivided lands or time shares and for some mortgage loans. In general, though, there’s no right of rescission for most real estate sales.
Q. I am about to buy a model home from a builder who has gone bankrupt. I had the home inspected, and there were many deficiencies and some shoddy workmanship. However, it is a beautiful home. The builder claims he will rectify all deficiencies. Should I proceed with the purchase?
A. Consult your own attorney. You need careful inspection not only of the physical building but also of the land’s legal status. You don’t want to take over liens held by unpaid subcontractors or other entanglements. Insist on receiving title insurance.
But why not wait to buy until the deficiencies have been remedied? Or if you’re willing to buy into some headaches, perhaps some of the purchase price could be held in escrow. It would be released only as the builder made the repairs within a certain time limit, or else returned to you to pay for the work done by someone else.
Q. I am writing in response to your reader who got an attorney letter saying the man who sold him the property wasn’t the real owner, and he must sign a deed giving it back.
County property records are public. Anyone can do the exact same title search that a lawyer or title company would do. I have many times. He should have looked there to see the real owner before he bought the place.
They couldn’t sell him what they didn’t own. The fact that he paid money for it wouldn’t make any difference. So, why on earth would anybody need a deed from him transferring the property back if your reader really didn’t own it anyhow?
A. Yes, it did sound like a scam somewhere, which is why I advised him to see his own lawyer to clear the whole thing up.
EL. Some time ago, I printed a letter from a couple who were putting their home on the market and had just too many friends in real estate. They wanted to proceed without hurting anyone’s feelings. I didn’t have an answer, but other readers have sent in their opinions, which vary widely. These are typical:
Ÿ When I was growing up, my dad was a real estate broker and he always said you shouldn’t do business with close friends or relatives. If they came to him, he would refer them to another broker. Even when I bought my house, he gave me advice, but he would not handle it. He said if something went wrong with the house, closing, mortgage or anything else, I might blame him.
Ÿ My neighbor handled a similar problem by collecting business cards from all “those many friends” and letting them know she would be randomly choosing one from a hat to list her property. I turned out to be the one chosen to not only list the property, but I also helped her purchase another property in a 1031 exchange. However, when it came to sell the new property a few years later, I didn’t win when she used the same method of selection. So, it evened out.
Ÿ Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.
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