Protect Your Seller From a Low Appraisal

We often see special stipulations submitted by a buyer regarding low appraisals .  A typical special stipulation sets a high price that a buyer will pay, but not a low price that the seller will accept.   Listing agents can protect their seller against being forced to sell based on a very low appraisal.  Consider the following scenario.

A property is under contract for $735,000 with the following special stipulation:
“Buyer agrees to pay $5,000 over the appraised price if the property does not appraise for the offer price.”  The property does not appraise for the offer price and instead appraises at $660,000.

Does the Seller have to sell the property and at what price?

Because a special stipulation controls over previous inconsistent content in a contract, the special stipulation changes the price that the buyer pays.  The appraised price is $660,000, so the seller has to sell at $665,000, $70,000 less than the original contract price. If the seller refuses to sell at $665,000 and goes to court, a court would likely agree with $665,000.

To protect your seller, a better special stipulation should include both a low price a seller will accept and a high price that a buyer will pay.  If you are representing the seller, counter with this language to set a low price:

Buyer agrees to purchase the property for $5,000 over the appraised price. Notwithstanding the above, the purchase price shall not be more than $____________ nor less than $_____________.


Source:  Weissman Academy, Seth Weissman, Secrets of Safeguarding You and Your Seller.