The buyer and seller executed an Arizona REALTORS® Residential Resale Purchase Contract with a purchase price of $550,000. The appraisal contingency (lines 107-110) was not deleted from the Contract. In addition, Section 8 of the Contract stated:
“If the property does not appraise for the purchase price, the buyer is willing to pay $15,000 above appraisal.”
The property appraised for $480,000— $70,000 less than the purchase price. The buyer claims that the purchase price is now $495,000. The seller claims that he did not agree to close escrow at that price and refuses to proceed.
Is the seller obligated to close escrow with a $495,000 purchase price?
Generally, language inserted by the parties into a form contract will govern over the pre-printed language. See Autonumerics, Inc. v. Bayer Industries, Inc., 144 Ariz. 181, 696 P.2d 1330 (App. 1984). Although not perfectly clear, it is likely that the language in Section 8 overrides the appraisal contingency. However, the language in Section 8 that says “buyer is willing to pay” does not address the seller’s acceptance of a revised purchase price. Because the parties never seemingly agreed to a purchase price, a court would likely find that there was no true meeting of the minds and no contract was created.
Independent legal counsel should be consulted.
In the interim, several practice tips:
If language addressing an appraisal is added in Section 8 or a counteroffer, the parties should clarify in the contract documents what is intended with respect to the buyer’s ability to cancel based on the appraisal contingency.
Rather than using language suggesting that the “buyer is willing to pay” or “buyer will pay,” a certain amount over the appraised price, the appropriate language to use is the “purchase price shall be $ above the appraised value.”