buyer backs out

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Posted by Charles in MD on November 03, 2009 at 01:05:24:

Maybe not such an unusual event in a down market. But I am selling a single-
family, I got an offer in May that was a tad lower than I wanted but I said
what the heck and accepted, the guy had numerous problems getting a bank
loan, not because he didn't have enough money, because he had too much --
wanted to put down 40% and no bank wanted to finance the small remaining
principal. So I convinced him to apply with 10% down and then pay down the
principal afterwards. Anyway, after 5 months he gets a loan commitment and
the bank sends an appraiser out to the house, and the appraiser values the
house well above what he is offering for it. Guess what -- the buyer pulls out
saying the appraised value is too high..... At first I didn't get it, but finally I
figure out that the buyer does not think the house is really worth the price he
initially offered, and was expecting a low appraisal. When it came in high he
became convinced that the appraisal process must be flawed.

Well, end of the day, it is just that he changed his mind, probably because
during the 5 months it took him to finally get a loan the local RE market has
declined. He forfeited the $1K deposit to me, but apparently decided this was
better than going ahead.

I suspect this is a common casualty of a declining real estate market. But
what strikes me here is that this buyer has determined the house values on
his own and even rejects the valuation of a professional appraiser as flawed.
What advice would you folks have to respond to this? Is he correct -- do bank
appraisers really simply overvalue houses to facilitate the approval process?
After the housing bubble I would think banks would be very conservative in
this area. Should I ask the bank or the appraiser to contact him and explain
the appraisal process and why they think the appraisal is correct?

thanks

Charles

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