So I am a fairly new agent still in my first year, and the listing agent of this property we have a contract on is in her 2nd year. Needless to say, we both f'd up a little and oversold a property. It did not appraise for the sales price, I notified them immediately when we got the appraisal report. We had 'orally agreed' between the buyer and the seller to extend settlement and allow for a re-appraisal. So, I sent her the signed extension addendum a few days before our closing date and she said it was signed and she would send it back as soon as she could, a couple days pass and she never sent it back. Now a week or two later she is threatening to ask for my buyers EMD if we do not close. The real problem exists where Chase bank (my client's lender) has said that if they issue a 2nd appraisal they use the lower of the 2 values, this does not sound right to me, I am about to call my manager but am looking for additional ideas, please help.

Additionally, I should note that the seller is not beyond reproach. She did not send us the coop application in a timely manner to allow for the interview and approval. Additionally, the coop requires a pre-sale inspection which has never to date, been conducted nor have we received the report. I believe, if we cannot work out the sales price peacefully, these facts could protect my client's EMD.. thoughts?

My client has offered to come out of pocket for about 1/5 of the difference between appraisal and sales price but this does not suit the seller. Seller is asking for 2/5 the difference plus some of our commission.

What does the contract say? Is there an out in the contract if the home does not appraise at contract price. Ask your broker..thats why you have one.
Second appraisals to "get" a price you are looking for are not allowed per current regulations on many loan types..this is bascially what chase is telling you-it wont matter if there is a second higher appraisal.
ask your broker!

There is usually a clause in the purchase agreement that states that the offer is contingent upon property appraising at the offered amount or higher. Make sure you know all your contracts like the back of your hand. It’s an easy way to get ahead.

Or it may say it's contingent upon the Buyer obtaining financing . . . . and without being specifically stated, the financing is intrinsically contingent upon the Appraisal.

Right now, I'm thinking that maybe too much time may have gone by since the Appraisal was completed.

Did the Bank ever say the loan was being denied because the value of the proposed collateral was insufficient?

Here, to protect their EMD, our Buyers must report that Loan Denial immediately, or within 3 days, to the Seller in order to get their EMD back.

Our P&S Contract specifically says the Buyer must do this, and should not rely on any Real Estate Agent to perform the function . . . . even though many of us do. That little clause protects us when we're negligent.

Just another reason for Buyers to read (and understand) every word in the P&S.

Stop messing around. Call your broker now they are the best person to advise you on this mess.

But do not forget to keep us informed I am interested to know how this turns out for you.

This why I train all my agents to call me right away if they have nay questions.They don't need to "assume" anything and wing it until they get knee deep in you know what.

The listing agent is more than likely just posturing to try and scare the buyers.

Who is holding the earnest money?? How much did the buyers put down?? I hope not that much.

The seller doesn't want the earnest money but wants a sale.The commission doesn't belong to you but to your brokerage.Any hit you take will most likely come out of your end and being a newer agent I imagine your split isn't great.

Get your broker to review ALL of the file so they have a complete picture.Earnest money is one of the most PITA things you can deal with.

Here we use closing attorneys and I have them hold it.If I am buying something I put very little down for earnest money.If they demand higher earnest money then I demand a much lower price.

The fact is that the earnest mnoey doesn't belong to either of the agents, it is a matter between the seller and buyer. Whoever is holding the earnest mnoey can't just release it to one party, both parties have to agree.
I don't know how it works inside the Beltway, but most states have a process if there is a dispute over earnest money.
RUN RUN RUN to your broker now

I *believe* we might have reached a deal so the problem will be settled. My broker said that because I notified them that the property did not appraise by sending them the appraisal report, the fact that the financing contingency expired and settlement date past (with extension addendum not signed) did not put my buyer in default because it showed I was communicating to them.. anyways, fingers crossed. In addition, at the time the seller's unit was the only one of its size for sale in the unit but 2 more of that size have come on the market in the past week so hopefully they do not want to pay coop fees on a vacant unit and compete with 2 other similar units at the chance the next appraisal will come in higher.. we'll see today.

I think your broker is halfway right about notifying them by sending the appraisal, but I hope you sent more then just the appraisal. If this were me and the listing agent didn't respond to the extention I would have had a termination of contract form due to appraisal and an earnest money release form all ready to send the listing agent prior to the appraisal deadline just to protect the earnest money. But then in Colorado this depends on the type of loan. If it was FHA, which most loans in my area are, there isn't an appraisal deadline until the closing date. And if the appraisal issue hasn't been worked out by the closing date I would again send the termination on the closing date just to be sure to protect the earnest money. I do these things because you never know what kind of crazy seller, buyer, or agents you will have involved. In my opinion you need to work hard to keep the deal alive, but also at the same time protect your buyers earnest money if things start to fall apart. But in the end advise your buyer what can possibly happen and have them make the decision on what they want you to do. It's kind of a tight line to tow sometimes.

Is this a GCAAR Regional contract or is it a co-op specific contract? In MD or DC?

If its a regional contract on a conventional financing contingency with an appraisal contingency the financing and appraisal contingencies DO NOT EXPIRE.

So if you put in 21 days for both, and 21 days comes and goes, unless the seller requests and the buyer agrees to remove both contingencies, they carry on all the way until settlement. In common practice in our area contracts are contingent on financing and appraisal all the way until settlement.

If you sent the notice (GCAAR form 1333) saying that the property did not appraise and requested the seller reduce the sales price to the appraised value...and you didn't hear anything back for 3 days. The contract becomes VOID and the buyer gets their EMD back. So, assuming you sent this notice and the seller failed to respond...there is no contract.

The same is true of GCAAR form 100, if the seller sends it to the buyer and the buyer doesn't respond by removing the contingency and providing a lender's commitment letter within 3 days...the contract becomes void. This is why most sellers and listing agents never send the notice, it gives the buyer an out, and most contracts remain contingent on financing until settlement.

Steve -- Thanks for that very informative post, it is the GCAAR contract for DC -- Good news though, WE HAVE A DEAL! After a month of going back and forth over this appraisal and trying to get a correction ordered/etc.. buyer offered to come up a little more out of pocket, seller down a little more, lister and I split 0.5% reduction and we're off to closing.