July 11th, 2016 at 10:35 pm
Answer: We don’t know. The language in question is what we call “legally ambiguous,” which means it can be reasonably interpreted in more than one way. For example, it could mean that the buyer must pay the difference, in which case the buyer cannot back out under the appraisal contingency. That is likely the seller’s intent. Yet, that same language could also mean that, if the appraisal comes in low, the buyer should not ask the seller for a price reduction but the buyer can back out under the appraisal contingency. After all, the words “must pay” were not used. Also, the appraisal contingency was not countered out.
The safest way for the buyer to proceed is to eliminate the ambiguity before entering into an agreement, such as by submitting a Buyer Counter Offer clarifying that the buyer can cancel under the appraisal contingency. Of course, oftentimes buyers don’t want to cause a ruckus because they are in a multiple offer situation. If that’s the case, perhaps you can just ask the listing agent for clarification (and get that in writing), or maybe your buyer is willing to take the risk of proceeding with the possibility of not having an appraisal contingency. Ultimately, if a dispute arises that the parties cannot resolve between themselves, it will be up to a judge or arbitrator, not us, to decide what that language means exactly, depending on the circumstances and the intent of both parties.
-Thank you to Margaret Cashion (Los Feliz Office) for suggesting this week’s legal tip.
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