FHA and VA Addenda Part III: A Deadline On Appraisals?
I had an "A Ha!" moment while teaching a class on Appraisals in Virginia and the new FHA and VA Financing addenda. In my previous post I describe the new FHA financing contingency as it is laid out in the new FHA Addendum to the Regional Sales Contract, and point out that there is language which makes it impossible to remove the financing contingency until a satisfactory appraisal has been received.
What I didn't explain, and didn't fully appreciate until I got an excellent question at last night's class, what why. The question presented to me was, where is the "Appraisal Deadline" in the new form? My reply, as I explained in my earlier post, was that federal law protects purchasers and their earnest money deposits from low appraisals, right up until the date of settlement,therefore there is no deadline. The follow up question was, "How do we protect or Sellers if several weeks have gone by, and we still haven't had any news about the appraisal?"
It was then that I realized that there is a way to kick out a Purchaser who is unable to provide evidence of a satisfactory appraisal, even when they are using FHA or VA Financing. The Seller simply provides a notice to the Purchaser that the contract will become void if the the Purchaser fails to deliver Form 100 removing the financing contingency. If the appraisal hasn't been done, the Purchase may not deliver Form 100 . . . effectively allowing the Seller to void the contract for lack of progress on the Appraisal.
In other words, the Financing Contingency Deadline is also the Appraisal Contingency Deadline. Anytime after that deadline has passed, the Seller can void the contract if the Purchaser's lender has not received a satisfactory appraisal.
Buyer's Agents should keep this important fact in mind when filling out the FHA and VA Financing Contingency Forms. While your buyer may be pre-approved and be an excellent credit risk, you may not want to put in a short deadline to try to improve the quality of your offer.
Next Post:
More the FHA and VA Addenda "Appraisal Provisions" paragraph.
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What I didn't explain, and didn't fully appreciate until I got an excellent question at last night's class, what why. The question presented to me was, where is the "Appraisal Deadline" in the new form? My reply, as I explained in my earlier post, was that federal law protects purchasers and their earnest money deposits from low appraisals, right up until the date of settlement,therefore there is no deadline. The follow up question was, "How do we protect or Sellers if several weeks have gone by, and we still haven't had any news about the appraisal?"
It was then that I realized that there is a way to kick out a Purchaser who is unable to provide evidence of a satisfactory appraisal, even when they are using FHA or VA Financing. The Seller simply provides a notice to the Purchaser that the contract will become void if the the Purchaser fails to deliver Form 100 removing the financing contingency. If the appraisal hasn't been done, the Purchase may not deliver Form 100 . . . effectively allowing the Seller to void the contract for lack of progress on the Appraisal.
In other words, the Financing Contingency Deadline is also the Appraisal Contingency Deadline. Anytime after that deadline has passed, the Seller can void the contract if the Purchaser's lender has not received a satisfactory appraisal.
Buyer's Agents should keep this important fact in mind when filling out the FHA and VA Financing Contingency Forms. While your buyer may be pre-approved and be an excellent credit risk, you may not want to put in a short deadline to try to improve the quality of your offer.
Next Post:
More the FHA and VA Addenda "Appraisal Provisions" paragraph.
---------------------------------------------------
Click Here To Receive Updates by E-mail
Disclaimer
posted by Marcus Simon at
2:41 PM
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