Buyer Should Receive the Return of Earnest Money when the Property does not Appraise for the Purchase Price
The buyer and seller executed the Arizona REALTORS® Residential Resale Real Estate Purchase Contract. The buyer agreed to pay cash, with no bank financing. However, in Section 8 of the Contract the language provided:
“The appraisal contingency set forth in Lines 107 through 110 applies even though this is a cash transaction.”
The buyer commissioned an appraisal and it came in $25,000 under the purchase price. The buyer therefore provided notice of cancellation and requested a return of the earnest money. The seller claims that because there was no “appraisal required by a lender” as set forth in Line 108 that the buyer is not entitled to cancel or receive the earnest money.
May the buyer cancel and receive the return of his earnest money?
Generally, in an all cash sale, the financing section of the contract does not apply. However, the buyer reinserted the appraisal contingency by way of the language in Section 8. Even though technically there was no “lender appraisal” required, the parties’ intent as evidenced by the document establishes that the buyer would be entitled to cancel if the property did not appraise for the purchase price. Independent legal counsel should be consulted.
Note: Language is provided in the Additional Clause Addendum (ACA) to address an All Cash Sale Appraisal Contingency. Further, the ACA language provides time frames for acceptance or notice, and disposition of earnest monies.