Tuesday, January 1, 2008

Appraisal Contingency

We won't have an update on the low appraisal before tomorrow, obviously bankers and appraisers take off the holidays, too! I thought I'd take this time to speak to Appraisal contingencies.

When you put an appraisal contingency in a contract, you are giving the mortgage company a fixed amount of time (usually between 7-14 days) to have the appraisal done to assure the house appraisal for at least the selling price. This is most critical in the case of 100% financing - the amount of the loan will be no more than the appraisal amount, leaving a shortfall for the buyer.

In the case where an appraisal is low, the appraisal contingency allows for the buyer to give notice to the seller, with a copy of the appraisal, that he/she wants the price lowered to meet the appraisal. The seller can lower the price, can negotiate somewhere in between, or void the contract.

You should check with a realtor in the state where you live. In Maryland, although the buyer specifies a number of days for the appraisal, in reality, the contingency doesn't expire. At the end of the specified number of days, the seller can elect to give notice to the buyer giving them three days to produce the appraisal, remove the contingency, or void the contract. If the seller does not deliver this notice, the contingency for the appraisal just continues.

It is obvious that your realtor needs to keep track of these dates, make sure the lender has a copy of the contract immediately on ratification, and makes sure the lender is aware of the time frame for the appraisal. This, is one of the many things your realtor will be watching on your behalf!

That's a short version, we'll explore this further tomorrow when I have more info on the short appraisal! Happy New Year.

REMEMBER, BE INFORMED AND CHECK BACK HERE OFTEN!

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