Can a Seller Back Out if the Appraisal is Higher Than the Offer?

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By Clever Real Estate Updated September 2, 2022


For home buyers, signing a contract to purchase a home is one of the most important purchases they will make in their lifetime. But what happens when the seller decides to back out of the deal due to the appraisal being higher than the offer? Buyers must be aware of their rights in this situation.

Can a Seller Back Out if the Appraisal is Higher Than the Offer?

When you near the end of a real estate transaction, it’s not uncommon for you to get butterflies in your stomach. But your hopefulness can easily turn into anxiety. What if the seller decides to back out of the deal after the appraisal?

Just because your offer on a home was accepted, that doesn’t mean the sale is a done deal. During the closing process, there are important details, rights, and obligations of the contract that you and the seller must go through. One of the steps you have the least control over is the home appraisal.

Buyers need to understand how the appraisal process impacts the closing process and what their rights are should a seller try to seller try to back out of the deal.

Home Appraisal vs. Home Inspection: Knowing the Difference

A home appraisal is an expert’s opinion on the value of the property. Using their training, education, and experience, an appraiser determines if the home’s value is close to the agreed upon sale price.

A home inspection identifies potential and existing issues with the property. Home inspectors survey properties looking for mold, plumbing issues, electrical problems, and issues with the foundation of the home.

» MORE: Get a free, instant home value estimate today!

What the Home Appraisal Process Means for Buyers and Sellers

For buyers, the home appraisal determines the amount that a lender would be comfortable loaning to them. Lenders make loans based on the loan-to-value ratio. If a home is appraised for lower than the sale price, the lender will give the buyer less money. A buyer can then make up for the difference in cash.

A home that appraises for higher than the purchase price is a benefit to buyers as it means instant equity. Its impact on sellers is subject to how motivated they are. Still, offering something for sale only to find out that it’s worth much more may be enough to make a seller reconsider.

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When Can a Seller Back Out of a Sale?

There are certain instances where a seller may back out of a sale without any legal repercussions.

Prior to the Contract Being Signed

A seller may legally pull out of a deal before the contract is officially signed.

During the Contract’s Five-Day Attorney Review Period

Most standard real estate contracts include a five-day attorney review period. This provision permits the attorneys of either party to cancel the contract for any reason, allowing either party to pull out of the deal with no consequence.

Through Addendums or Contingencies Added to the Contract

A seller may place addendums that permit them to back out of the deal without consequence in the body of the contract. These include contingencies like the seller must find a new home first.

The Buyer Can’t Secure Financing

A seller may not want to wait for a buyer who is unable to secure a mortgage within a certain time frame. In this instance, the seller may move forward with other buyers.

The Seller Is Unwilling to Make Repairs That the Buyer Requests

Buyers may request the sellers to make repairs to the property based on the results of a home inspection. A seller who is unwilling to make the changes may constructively void the contract as the buyer will be required to either renege on the requested repairs or the contract itself.

What Should Buyers Do When Sellers Get Cold Feet?

When a seller decides to back out of a deal, they risk potential legal ramifications. Buyers must be aware of the laws governing real estate transactions, including "specific performance" provisions which protect buyers by forcing sellers to honor their duties under a signed real estate contract.

Buyers may also sue sellers for damages resulting from a breach of contract. Damages can include money spent on moving, storage, and temporary housing.

Why Working With Clever Partner Agents Gives Buyers an Edge

Want to make an offer on your dream home, but would like to avoid the pain that a seller with cold feet causes? Working with a Clever Partner Agent is the best way to navigate the negotiation process. With years of experience and real estate knowledge, our Partner Agents will make buying a home a positive and stress-free experience.

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