The Florida Realtors/Florida BAR contract for sale and purchase of real estate will change effective November 1. Important updates to the financing clause addressing appraisals may affect you. Now, the mortgage approval deadline will also include the receipt of a satisfactory appraisal. The previous version of the contract did not have an appraisal deadline.
Appraisals have been backlogged in the busy Destin, Florida real estate market, and all over Florida for the past year. Appraisals, or alternate valuations (for example, “desktop” appraisals, appraiser-assisted, or AVM “automated valuation models”) are part of the mortgage loan process, and how a lender vets a property they are lending on. Appraisals can take two to three weeks, and many assignments are turned down by appraisers due to the increased volume of orders for new purchases and refinance loans.
Appraisals are often paid out-of-pocket by the buyer at the time of the order. This could be between $450 and $2000 or more depending on the house. Some buyers, upon advice from their agent, delayed having their lender order the appraisal until the home inspection was complete – which could take up to two weeks. That’s because if they cancelled the contract due to inspection, they would save the appraisal expense.
On the other hand, if they ordered the appraisal right away, then cancelled afterwards due to inspection, they’d be out that money. (With the new Florida contract, that sneaky tactic is about to hit a road block.)
Since the previous version of the Florida FR/BAR contract had NO appraisal deadline, it could be done by day of closing. If there was a problem with the property under-appraising for lender needs, the entire sale could be threatened. That’s no fun for a seller who just moved a house full of furniture, or a buyer whose lease is about to run out. As appraisals have become more backlogged, the last-minute appraisal situation has become worse.
Florida Realtors’ solution is to have a date-certain by which the appraisal is complete. That date is the same as the loan approval deadline. You must specify the deadline in the contract, or it becomes the default time period – 30 calendar days (extended to the next calendar day if the time period ends on a Saturday, Sunday, or national legal holiday.)
If the finance and appraisal deadline passes, and there is no extension requested, the buyer can lose his deposit if he fails to close.
So, what can you do about this new deadline to minimize your risk of losing your deposit?
- Ask your lender to order the appraisal right away.
- Find out when the due date is for the appraisal.
- Find out when your lender expects mortgage approval.
- Use the later date of the two, based on your consultations with your lender, in the contract paragraph 8b.
- Ask for an extension should your approval deadline be in jeapardy.
It’s Wendy… It’s Sold!
Wendy Rulnick, Broker, Rulnick Realty, Inc.
Email Wendy: [email protected]
Consult with your attorney for legal advice.
Wendy Rulnick, Broker, lists and sells real estate in Destin, Santa Rosa Beach, 30A, Miramar Beach, Crestview, Sandestin, Seaside, Rosemary Beach, Okaloosa Island, Fort Walton Beach, Niceville, Freeport, Bluewater Bay, Navarre, Florida.