The power of real estate contract modifications during attorney review
One of the most important jobs we have when we represent the buyer in a real estate deal is to immediately review the contract and propose modifications within the standard 5 business day attorney review period, which runs from the date of seller acceptance.
One addition we always make to the standard contract is to make it contingent on the property appraising at the contract price. The market is hot this summer, and we are finding that a lot of properties are appraising under the contract price. When this happens, by making the contract contingent on the appraisal, it gives our client leverage to ask for a price reduction. If the reduction is not granted by the seller, our client is then free to terminate the contract with return of earnest money.
Recently, this important modification was worth $50,000 to one of our clients, as their contract price was $750,000, and the property appraised at $685,000. We were able to negotiate a price reduction to $700,000, which worked out perfectly for our clients. Yes, they still paid slightly above the appraised value, but our clients felt that that appraisal did not necessarily reflect the value of the property to THEM. It really was an ideal property for these buyers, situated right in their desired area and next to their choice of elementary school. The clients did not wish to spend further time on their search.