Appraisal Reviews are becoming the norm in real estate transactions, yet most of our contracts have a standard time frame to remove our contingencies, on the California forms (CAR forms) it's 17 days unless adjusted. Often we find that sellers will shorten this time frame to 10 or even 7 days. But there is no way to tell if a lender is going to require an appraisal review at the last minute, if the appraisal contingency is removed, we expose our buyers to damages.
Understandably, the seller wants the contingencies removed in the agreed upon time frame. Some lenders are known for the last minute review....Bank of America comes to mind. Others are popping up and at some point, I believe all loans are going to be subject to this.
I've had this happen a few times now, and I'm now addressing this potential problem up front. When I write an offer, I make sure to note that the Appraisal Contingency does not include any Appraisal Review...that the Appraisal Review is a separate contingency and stays in effect until funding.
I was originally concerned that the listing agent would be concerned with this clause. What I've found, however, is that by addressing this upfront, and not throwing it in when it's time to remove the other contingencies...the listing agent is perfectly comfortable with this. When I've waited to discuss this during the process, they see it differently...as a way of keeping one foot out the door. Even REO asset managers are willing to allow these to be two separate contingencies.
In this changing lending atmosphere, we need to watch for the new opportunities to protect our buyers/sellers.
Wendy Cutrufelli
Broker Associate
925.917.1135
The positions on this site are my own and don't necessarily represent Alain Pinel Realtors' positions, strategies or opinions.
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Wendy,
Very interesting info. Out on the east coast, we don't have a separate appraisal review contingency even in our contract. Lenders review the appraisal, but they are just part of the full mortgage contingency. I'm sure we are all in for changes ahead. Appreciate you sharing.
Bob
Wendy, our standard contracts are mute on the subject and the issue would appear in attorney review. Thanks for the education. I'm going to pay closer attention to the appraisal review.
Hi Andrew: Our contract has a specific appraisal contingency that is separate from the loan contingency. We run into problems when the lender approves the appraisal after the first review (within the contingency time period) and omits mentioning their requirement for a second review.