UPDATE: As of November 1, 2021 the new version (6) of the FAR BAR As-Is is in use. ABSENT a separate appraisal addendum rider the appraisal MUST be completed inside the Loan Approval Period. If there are concerns that the property will not appraise or that the appraisal cannot be completed inside the Loan Approval Period then you SHOULD use the appraisal addendum form. If you are a Buyer reading this because your agent doesn’t know, you need a new one, call me, Chris Ryder at 561-626-8550.
If you are submitting an offer on a property and you are concerned that you’re paying too much OR that your lender will not have time to complete an appraisal of the property and want to include a requirement that the property appraise.
OK, no problem, in Florida, most residential real estate is sold using the FAR/BAR As-Is but one could also use the regular (non As-Is) FAR/BAR or the regular FAR or the FAR with an As-Is addendum. GENERALLY SPEAKING, one should use the addendum of the same version as the base contract. So, use the FAR/BAR addendum with the FAR/BAR As-Is Contract, BUT you don’t have to.
Choose one of these appraisal contingent addendum.
Why do we need one? Well, if the Contract does NOT specify that the Buyer will use financing then I typically include one. Yes, one could have the property appraised in the inspection period but it’s tough to get that done in that time line.
If the chosen Contract specified financing then the current version of the FAR/BAR As-Is for example has an appraisal contingency written into the Contract BUT IT IS NOT APPLICABLE AFTER THE LOAN APPROVAL DATE.
“(2) Buyer’s mortgage broker or lender having received an appraisal or alternative valuation of the Property satisfactory to lender, if either is required by lender, which is sufficient to meet the terms required for lender to provide Financing for Buyer and proceed to Closing (“Appraisal”).”
IN this instance where one is using the appraisal contingency written into the Contract, first, it must be obtained by the Buyer’s Lender and second it must be “sufficient to meet the terms required for lender to provide Financing for Buyer and proceed to Closing.” THIS IS AN IMPORTANT POINT. What if the Buyer is strong or has a low LTV and it does not matter to the lender what the property appraises for? With the specific Appraisal Contingency addendum in place then the Property must appraise at or above the Purchase Price otherwise it need only appraise at a number sufficient to meet the underwriting guidelines of the lender.
