What does your realtor say?

Here is the purchase agreement. I don’t see an appraisal value contingency mentioned anywhere else. Do I have the right to keep the Ernest deposits If they couldn’t get mortgage because they refuse to cough up more money? Or at least threaten them if they don’t sign the release form, they cannot walk away with the Ernest money.

Did you talk this over with your agent?

You really do need to ask your agent or real estate attorney.

That contract does make clear that it is contingent upon obtaining a loan, but doesn't limit to one lender (so if one lender falls through, do they have an obligation to try elsewhere?) Perhaps if they make no effort to find another lender, you have a right to keep the deposit, but you need to be advised of this by a professional.

Seems that dangling the deposit might inspire them to release you. I wonder if they are keeping you on the hook "just in case" the other deal doesn't work out.

Can't you show the house for back up offers, especially since they have told you they are backing out? I think in my area it is permissible to do so until the sale closes. Do you have anything in writing (email, for example) that documents that they are reneging?

My realtor said I couldn’t keep the money. She is trying to get them to sign the release. She is telling them they have freedom to buy another home then they should grant us the same freedom to find another buyer. The broker I worked with in the past told me I should easily get an appraisal at my selling price from another appraiser. My house was appraised at the same price 4 years ago through the same bank. The homes went up 20% in the last 4 years. Seriously the home is sold on the cheap side. I thought the appraisal would be higher than the selling price. But one bad example in the appraisal ruined the whole thing. The other two comparisons would put our house $10000 more than the selling price.

The buyer is definitely keeping us on the hook as a back up. But it’s not fair to us. We had enough with them. We just want to move on.

Your contract states that they have 30 days to give you a Commitment Letter. W/O seeing the rest of the contract, I would say your contract is still in effect. It is up to the buyers now to determine if they want, or can get financing, or bring the $25,000 in cash, until the 30 days is up.

If they enter into a contract with the other property, then they will terminate with you. As long as that 30 day period is in effect, you can not keep the deposit.

You agreed to the 30 day financing contingency, and they have the right to use that time to make up their mind.

I hope the appraisal on the other house they offered on also comes in well below the selling price! Will they dump that transaction too? It is fine to back out and move on, but they need to give the sellers the same courtesy.

Thanks everyone for your comments. We got the release form signed. Now the house is back on the market. Let's hope it will sell quickly.

For good or bad, courtesy in a business transaction sometimes goes out the window. Here, the buyers were just using their negotiated financing period to determine their best options. The sellers gave them 30 days to come up with appropriate financing, and the buyers were in their right to use this time.

Glad to hear that they did not need the entire period and signed the release.

Have your agent go over the appraisal report very objectively and see if a price adjustment is necessary.

^This is true.

Also, in our MLS we can show the house while it is under contract even without a release from the buyer. We have two ways to do this: post the property as "contingent" or post the property as "backup's wanted" which indicates that there may be an issue with the primary contract. If a subsequent buyer is interested and makes an offer you can execute the offer subject to the cancellation of the primary contract within a negotiated number of days. This way you have no downtime. Explore this option with your agent. There are specific forms that apply when formulating these backup contracts.

As to the appraisal, do as ncrealestateguy suggests. I have seen accurate appraisals and some doozy's that are full of inaccurate data. Review carefully, but objectively.

New development on the house.

The house is back on the market. The buyer lost the bid to a cash buyer on my neighbor’s house. Now they are back for more negotiations. They have a top notched realtor who will not let us walk away even though we repeatedly said we moved on. He begged and pleaded to my realtor so now we are back on.

We lower the price another $7000 but is still $5000 more than they can afford (extra down payment). Both agents agreed the first appraisal was low. Now they are ordering another appraisal. We extended the contract another 2 weeks. We are also allowed to keep the house on the market for a backup buyer. Hope the new appraisal will be more representative of the market value. Let’s hope everything works out this time around.

Good news. Hopefully the new appraisal will cover the needed $5000.

Not sure I would have put emotions aside and worked with these buyers again! Good luck! Let us know how it all works out.

Don't know why you lowered the price or extended the (released) contract for this buyer, unless you have truly concluded that the house was overpriced to begin with. The buyer's realtor begged your realtor, so you gave in? Is the market slow in your area, or is your house for some reason unlikely to attract offers? I do get the "bird in the hand" idea, but these guys don't seem to be too reliable. How do you know that they aren't still looking for a house they can afford and won't dump you again?

I was turned down for a refinance (to a lower interest rate) once -- the reason was, the appraiser told the bank that my house was a "manufactured" home ie a trailer!!! Because it was on a pile & post foundation, not unusual in homes from the 40s & 50s in that part of SoCal -- but the appraiser didn't know the difference. Glad you are going to get a new appraisal.

You could also suggest to both realtors that they could help this sale go through by agreeing to lower their commission. It's not an unusual step - my realtor offered to lower his commission just to get me to sign with him.

I don't understand why these buyers are getting bashed... 99% of all buyers would have done the same thing if an appraisal came back $25,000 less than contract price. The fact that they are willing to pay another $450 for a second appraisal tells me they are motivated buyers.

I need to point out they were looking at my neighbors’s house before the appraisal came out. The appraisal provided them with a way out. There were two things happened around the same time, new attractive house came to market and a lower appraisal, that worked in the buyer’s favor.

As to why we agreed to lower the price. We lost a month. My realtor told us once August comes around, we will have a tough time selling our home. Our neighbor’s home is priced low since it’s a for sale by owner house. That added more competition. We still don’t know how much it was sold. If at the listing price, that would put pressure on the next appraisal on our house no matter who’s the next buyer. I am hoping the price got bidded up, but it’s a cash deal, and closed after a week on the market, so who knows. Since it’s the closest house to our home and exactly the same model, it will be on our appraisal as comparisons for a while. The current situation does make us less confident. That’s why we agreed to lower the price again. I do worry they might walk away again if another deal comes around. But at least the house is still on the market. I am hoping for better luck this time.

One more thing, my agent said the other agent has a reputation for saving dead deals. Now I believe her. Maybe next house I should use him, haha.

So, on this new contract, did you shorten the financing contingency time period? Did you ask for more Deposit? Did you keep the same closing date?

I bet your neighbors home is priced lower because that is what your home is worth too. Why do you think the appraisal is wrong? What is the new contract price?

ncr, did you notice that OP said that neighbor's house is FSBO?

JulieHe, thanks for answering my questions. It has been decades since I bought or sold, so how things work is of interest to me. Have you asked your neighbor what they sold for? It will be public record, but in my area it is up to a month after close before the information is available.

NCrealestateguy, not so much bashing the buyers, and I can appreciate their position (somewhat), but it was the refusal to sign the release that made me suspicious.

I wish that people would stop posting just to say, "What does your agent say?" I'm sure that is the first step for most people who have an agent, and the poster is just asking for additional thoughts on the matter.

You cannot keep the earnest money because the house did not appraise as high as the mortgage company requires, because this is a purchase involving a mortgage, and not a cash purchase. However, that said, it's odd that there is no appraisal contingency anywhere, leaving you in this position. I'd just continually pester the buyer to sign the Release so you can sell, but you really can't enforce it until the 30 day time runs. I see that the closing is now 3 days away. You should be able to terminate then.

Just saw that the deal is back on. I sure would not have lowered the price for them that much! You have to tie down time periods very tightly with buyers and sellers. Give them a few days to get a commitment. I once bought a house from assuming a purchase agreement to closing table in under three weeks (and with a mortgage). It can be done.

I wish that people would stop posting just to say, "What does your agent say?"

That would be me. I've seen people post here who did not ask their agent ("I don't want to bother her."), or who have no agent and are doing FSBO without having a clue, or who have been told over and over again by the agent what they can/cannot do.

Why should we waste our time responding if we don't know the exact situation but the agent does? And the answer can vary with each market in the country.