Buyer will have VA Loan - Appraisal Question

[Susyflower]

Greetings,

    Long time lurker...my husband and I are in the process of selling our house.  We've accepted an offer and the buyer has a VA Loan. We just got a document from our realtor from the buyer that we need to sign regarding the appraisal and the fact that the buyer has a VA loan.  We are unsure about signing it but don't want to kill the deal.  It basically says that if the appraisal comes back lower than the offered purchase price buyer can walk way and not lose their earnest money.  It also says that even if the appraisal comes back less than the purchase price the buyer can continue with the purchase of the home.

    HELP! We really need to sell our house as we've put an offer in an amazing house and don't want to get bumped because of our contingency on selling our house.

[NC_Mtg_Loaner]

Yes, it's the standard VA Amendatory Escape clause that by ratifying (and you really shouldn't object) it provides your consent that you will 'bargain in good faith' in order to negotiate a deal with this buyer.

It's also active/customary for FHA deals as well.

Look at it this way.....If you are selling your house for $205k but the appraisal comes in at $200k are you really going to "hold out" and charge that Veteran more money? (which he'd likely need to take out of his own pocket)    If so, he's got the ability to walk and get his EMD $ back.

Nonetheless, read the form, sign it and go ahead and order your pest inspection report and do everything in your power to meet the needs of your buyer whose likely got bigger fish to fry than possibly over-paying for your house, should the appraisal come in lower than the offered/contract price.

[Anonymous]

Hi there.  I'm in the process of purchasing a home with a VA Loan myself.  My understanding (and someone chime in if I'm wrong) is that first, the addendum is mandatory for VA Loans.  If you choose not to sign it, your deal is effectively dead.  Bear in mind that in so doing, you are also effectively eliminating buyers with FHA loans as an option as well.  FHA loans have a very similar appraisal process.  As I understand it, the VA appraisal is in place for two main reasons:  to protect veterans from overpaying for a home and being "upside down" on a home loan and to ensure the home is safe, structurally sound and doesn't present any health hazards.

[JVille]

Absolutely correct, if you refuse to sign your transaction is dead. But if your home does not appraise to the sales price your buyer likely does not have the money to make up the difference and his loan would be declined anyway.
In any situation requiring an appraisal a home that does not appraise will required buyer and seller to renegotiate or buyer will walk with EM refunded. Please sign and return immediately!

[Susyflower]

Thanks for your replies.  Everything everybody said makes sense and we are excited to allow a Veteran the chance to purchase her first house.  The home inspection of our current home went well, have to slap some new paint on the fascia but that's it.  Will sign the addendum and update with progress.

Thanks!!