Q: Florida Buyer has a pre-approval letter for $600,000. Mortgage of $540,000. Buyer is under contract for a house
priced at $532,500. Conventional Loan with 90% financing. He has no appraisal contingency. He is putting down $20,000 in security deposits. If appraisal comes in below sales price, will he be able to walk away (if he so chooses) and be refunded his deposits?
A: That all depends upon the specific language contained in your contract of sale.
A: You would need an attorney to review your contract, which you (or your seller if an agent) should have representing you in a sale anyway. If this is the FARBAR contract then possibly yes, if the appraisal of the property is not sufficient to support the loan amount then Buyer may be able to walk away and get the deposit back. It already sounds like there is an issue if buyer is borrowing $540k for a house worth $532k; after putting $20k cash down. Why would the bank lend more than the house is worth? 90% financing on a $532k house is not a $540k mortgage, that makes no sense; nor is it $20k down. 90% financing means 10% down or $53,200 on a $532,000 house.
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