Appraisal came lower than purchase price?

We entered into contract and we had our loan approved with just asking for some documents which we provided and we removed the contingency since our agent mentioned there should not be any problem. But later the lender came back telling that they cannot fund because garage was converted into room without permit.

Then we immediately applied at another lender and again got approval but after two days we got the bad news that appraisal had a problem. This time it came $45k lower than purchase price, the appraiser did not account for school district and had some foreclosed comps.

Now we are in a fix, we have some cash[reserved for renovation] but we are short by $7k and even though we requested the seller to reduce the price, they are not willing to do so.

They even sent a document asking contract performance[basically telling that if we don't close we will lose the deposit]

What options do we have now?, Basically we dint get loan from both lenders because of problem with the appraisal. Also in worst case if we back out is there any way to get back 3% deposit ?

Update:

@Glen we removed the contingency since our loan was approved apart from few documents.Lender did not mention about appraisal, its only after removing contingency we got to know about appraisal problem

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  • 1 decade ago
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    Im sorry to say but that was the worse thing your realtor could have ever done..he should have never told you to remove your contingency. I hate to say but he screwed you over.

    Your loan was not approved (it may have been pre-approved) if you still had a few documents, plus a loan can NOT go through underwriting and be approved without an appraisal. Your realtor should have never told you to remove that. However since he did and it is a legal binding agreement, if you back out you will lose your 3%. I would be reporting this realtor ot the board because obviously he has no clue what he is doing. Im sorry you had to go through this, I know it doesnt seem fair to you...but you should have never ever let him remove that.

  • 1 decade ago

    If you back out, you will lose your earnest money deposit. Once you have removed the financing contingency, you can't take it back, even if the appraisal fails to return a value sufficient for you to obtain the loan.

    As a real estate broker, I always include a separate contingency to the effect that the appraisal must return a value equal to or greater than the offered price, or the buyer can elect to walk away. Apparently your agent did not do so.

  • 1 decade ago

    Your offer wasn't contingent on your loan approval or the appraisal? If it was then the seller is legally required to return your good faith deposit. If they don't release your deposit money back to you will have to sue them. Tell them that you will be filling a "lis pendance" lien against their property and they will not be able to sell the property until the matter is resolved in court, which could take many months or longer.

  • 3 years ago

    No...you may the two have the broking shrink the cost of the domicile by $2,000, or you may make an even bigger down fee (by $2,000), or some mix of the two (i.e., shrink fee by $a million,000 and improve down fee by $a million,000).

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