Dear Claire: When Should I Walk Away?

Navigating Contingencies: When Should You Walk Away from a Real Estate Deal?

In all seriousness, this is a very difficult question and really one that only you can answer when you’re buying a property. What do I mean by that? If you are a first-time home buyer and you are scrimping and saving, and you have, you know, a very tight budget, and you are cramping and saving all the money. You can make the down payment; however, something comes up, it might be more prudent to walk away.

On the flip side, let’s say you make a good living and have been able to save money. It may be a situation where you might be able to take on things that some other people could not. Let me give you some examples. As a buyer, the two big things that everyone is always worried about is that something goes wrong during the inspection — something big, like a foundation. That’s a big one. That’s complicated and it’s hard to figure out. And it’s also something that if we wanted work to be done on it, it takes a long time to schedule, it takes a long time to do it, and can balloon from a small project to suddenly, “Oh my God, that’s $150,000 worth of work pretty quickly.” This may be an example where you’re saying, “No, I can’t do it.” However, say your Dad is an excavator who does foundation work for a living and it may be totally fine for you. For a lot of people, it’s not going to work out. Most things that come up can be negotiated on depending on how big it is and how much we know about the problem.

In most situations, the lender will require an appraisal and will send an appraiser to the property. Since the lender hires the appraiser, they choose who the appraiser is going to be. They send the appraiser out and then the appraiser comes back and says what the house is worth. I think you should know a few things about this that are kind of tricky. Appraisers have a copy of the contract, so they know exactly the number that they’re shooting for. They also have access to the Multiple Listing Service (MLS), which is what I have access to, and they pull all their comparable data from the same information that I will have been provided.

Now, in a market that is accelerating at the rate this market is that houses that will have gone into contract and closed are 60 days old if the market’s going like this and your comparables are there. They’re not going to have caught up with where the market is, which makes sense. So, say there’s a house at $450k and a month ago, it was worth $425k. The comparables that we’re going to be looking at are going to be worse. $425k. In an accelerating market, especially in markets that are going as quickly as ours, it’s going to be difficult for the appraiser to find comparables to support the price that you’re willing to pay in this market. So sometimes the appraisal is going to be one that we must walk away from. However, lot of times we can figure out a way to negotiate the loan so that you are putting less money down. Or we negotiate with stop, so we can go back to the seller and say that the appraisal came in $50,000 low. We need to negotiate the price and, in this market, sometimes the seller will agree.

Sometimes the seller will say, “I’ve got somebody in backup and they’re willing to come up with the extra $50,000.” — “So, sorry.” We have a few things at our disposal. The third thing we can do is to test the appraisal. We can go back to the appraiser and say, “Hey, the comparables you chose aren’t that good. And here’s why it is worth more.” Inspection and the appraisal contingency are reasons why you would want to get out of contract.

If you have any questions about the buying or selling process, I’m always here for you. Subscribe to the Paris Group Realty, LLC YouTube channel where there’s all kinds of information that you might be curious about. I hope you have a great day. Talk to you soon.

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