Potential home appraised below sales price (subject to repairs). I don’t feel post-appraisal negotiations were made in my best interest. Realtor did not consider that appraised value was subject to repairs
I am a first time homebuyer learning the ends and outs of purchasing a home. I recently put in an offer for an older home that will require a good but of work. The appraisal determined that the home was worth $254,000 SUBJECT TO REPAIRS required for an FHA loan. The appraisal stated the repairs could cost between $10k-23k, but advised to get an estimate from a licensed contractor.
Per my realtor, the seller did not have funds to cover any repairs. They agreed to reduce the price to $254,000 with a $5,000 credit, but we would need to need to fund and complete the required repairs prior to closing. NOTE:I have a family member who flips homes who would handle the rehab for a reasonable price. I also have the refunds to pay for the rehab, but I did not feel comfortable paying for repairs prior to closing.
I asked if the seller would reduce the price to $250k for the inconvenience, but they responded that he can not sell the house for less than the "appraised value". My realtor asked me to get an estimate of the repairs from my family member, but I did not get one because I did not feel comfortable with the idea of doing any work on a home I did not own. I was told I had to decide if I wanted to accept the seller's terms. After I expressed a desire to leave the deal, my realtor offered to research if a conventional loan appraisal might allow us to close before the repairs were completed. This ended up not being an option, because the repairs were major issues that would be required for a conventional loan as well.
One night, I sat down to review the appraisal and decided to look into meaning of "subject to repairs." Upon doing some research, I realized that the home was only worth $254,000 once the repairs were completed. I brought my research to my realtor. First she confirmed my research with the appraiser, who also confirmed that I was correct. She then responded by reminding me that the seller was offering a $5,000 credit. She stated multiple times that we would have been completing these repairs anyway during the rehab process and this is why she did not pursue a greater price reduction. She reminded me that I never provided her with a quote from my family member.
Now that the cost of the repairs might have more of an impact on the numbers, I reached out to my family member for a quote, which returned at ~$25,000. Suddenly, the seller became more invested in getting their own quote and researching ways to cover the repairs. During this time, I did some more reading and ended up looking more closely at the FHA Loan Contingency ppwk that we signed. Apparently, when the home appraisal is low, the SELLER should get an itemized estimate of the repairs from a contractor of their choice and provide it to the buyer. From that point, we have three days to negotiate new terms or terminate the agreement. My realtor explained that she only asked me to get an estimate because she knew the seller could not afford the repairs and she figured that I wanted my family member to do the work. Overall, I wish that we followed the protocol in the contract and requested that the seller get the estimate in the first place. I also feel that no one was looking out for my best interest when it came to the post-appraisal negotiation. The $5,000 seller credit would not have been a equitable concession for paying $254k AND $25K for the repairs BEFORE CLOSING.
In the end, the sellers took two weeks to provide us with two quotes, one for $~28,000 and another for ~$23,000. The seller eventually agreed to reduce the price by $25k, but I decided to walk because I did not feel comfortable fronting the repairs before closing.
Again, this process was new to me, but in your opinion, what are your thoughts on how the situation was handled? How should circumstances such as these usually be handled by a realtor?