Buyer’s Personal Evaluation of Value Can be the Basis for Cancellation Even if Appraisal Contingency is Waived
The Buyer and Seller executed an Arizona REALTOR® Residential Resale Purchase Contract (the “Contract”). It is a cash transaction. In addition to the cash sale language confirming there is no financing or appraisal contingency, the buyer wrote in section 8 of the Contract: “Buyer waives the appraisal contingency.” The buyer did, however, retain the inspection contingency in Section 6a. During the inspection period, the buyer conducted her own evaluation of value based on recent sales and an in-depth review of the area. There was not an appraisal conducted, but based on the buyer’s personal evaluation, she elected to cancel the contract and timely delivered a Buyer’s Inspection Notice and Seller’s Response to the seller stating “Value of the property is not sufficient” as the reason for the cancellation. The buyer requested the return of the earnest money, which the seller contested because the appraisal contingency was waived.
Is the buyer entitled to a return of the earnest money deposit?
During the Inspection Period, the Contract affords the buyer the opportunity to, among other things, investigate “the value and condition” of the property. Here, the buyer’s personal evaluation of value was the basis for the cancellation; there was no appraisal conducted. Since the buyer retained the right to inspect pursuant to Section 6a,“insufficient value” is a valid basis for the buyer to cancel and the buyer is entitled to a refund of the earnest money deposit even though the appraisal contingency was waived.