That adds up to a whopping $50,080, and the buyer no longer qualifies because he or she does not have sufficient funds to close. Sales agreements may also be contingent upon a successful appraisal. Even if the sale is not contingent on an appraisal, you will get a lot of flack from buyers who now believe they are paying too much for the property.
In either case, the transaction may have to be renegotiated in order to make the transaction work. The second problem that can occur is that the home doesn’t meet the appraisal guidelines, and therefore underappraises.
Carl was a buyer purchasing a property near Scranton, Pennsylvania. The property he was purchasing was a small horse farm that included twelve acres, a four-bedroom, ranch-style home, and a twelve-stall barn. The purchase price was $285,000. Carl’s mortgage lender told him the loan would be no problem, and he would be able to settle the property in forty-five days.
The lender hired an appraiser who performed a Fannie Mae appraisal on the property. The appraiser could not find similar homes on significant acreage in the area, so they compared the home with other ranch style homes.