$13,000 down the drain? Locked into a deal that didn’t appraise..

[Russ Marlborough]

I am suppose to close this week on a duplex that didn’t appraise. The Purchase price is 150k and it appraised at 120k. I am locked in due to various circumstances and will loose my 13k deposit plus miscellaneous inspection and other costs totaling around 15k.

Crazy thing is The cash flow of the property is still outstanding.

Owner will not budge on price due to the income the property throws off. It Makes 1900 per month.

Do I walk away from this deal and forfeit the money I have put out for deposit and miscellaneous expenses or do I take the appraisal on the chin and take over this property in the negative?

Thanks for the help!

Russ

[Joshua A Kloos]

@Russ Marlborough

Couple of things! 

1. Depending on the circumstance, if you back out the owner will have to display the appraisal price to future buyers (if he is using a real estate agent), so you could bring that up/talk to your agent about it

2. Get physical confirmation on the rents - receipts, leases, damage deposits, etc

3. If it is cash flowing, why back out? You wanted it at 150k so, in my opinion, who cares what it appraised it - equity isn't "real money" anyway. Home value is for the bank and everything that affects the home value, to some degree, is out of your control. 

4. I don't know your financial position, but losing 13K would be a hit in my opinion and isn't worth backing out simply from that. 

5. The duplex I just sold last Friday for 250K was throwing off $2800/month and I purchased it for 207K a year ago. I asked 250K because of the cashflow - I did to my buyer the same thing that is happening to you. The bank appraised my property at 220K yet I still had a cash offer within 2 days of being on the market.

6. At the end of the day if you like it, I don't think it matters what the bank appraises it at. 

Hope this is helpful!