Realtor® Legal Tip – If the Buyer cancels the REPC because of a low appraisal, does he get the earnest money back in full?
January 30, 2018
Author: Curtis Bullock
Suppose the Buyer is under contract with the Seller. The Due Diligence Deadline passes and couple days later the appraisal comes in at a lower value than the contract price. The Buyer attempts to renegotiate price with the Seller but the Seller is unwilling to come down. Prior to the F&A Deadline, the Buyer submits the Notice of Cancellation along with the Notice of Appraised Value to the Seller as required by the REPC. Does the Buyer get all 100% of his earnest money refunded?
There has been some confusion between sections 8.2 (Appraisal) and 8.3(b)(i) (Financing) of the REPC. The thing to remember is that these two sections of the REPC are independent of each other. If the Buyer cancels because of a low appraisal (by sending written notification along with the notice of appraised value), section 8.2(a) indicates that the earnest money is refunded. On the other hand, if the Buyer cancels because of financing according to section 8.3(b)(i), then how that section is filled out will determine how much of the earnest money is returned to the Buyer.